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Why Should You Get An Annuity Plan?

dateKnowledge Centre Team dateSeptember 03, 2021 views214 Views
Annuity Plan | Best Retirement Plan | Savings Plan

You work hard for more than 35 years so you can live a secure and comfortable life after retirement. To have the life of your dream post-retirement, you must make correct investment decisions early in your life. One way to secure your future is by ensuring you have availability of regular funds after retirement. Retirement is the time when you would like to do things you love doing than worry about your income and expenses.

Retirement and pension plans help you achieve your regular income goal after retirement.

What are Annuity Plans?

An annuity plan is an investment option that helps you receive regular payment from a lumpsum investment. Life insurance companies provide multiple annuity plans you can use for your specific income goals. The best pension or annuity plans provide a safe investment space for your money and preserve your investment for a long time.

You can choose from the following annuity options:

I. Deferred Annuity Plans

Invest lump sum or regularly to build a corpus. Grow it for a few years, before you finally start receiving regular income. These annuities often give you the option to invest in equity as well.

II. Immediate Annuity Plans

These plans will start giving income immediately. If you have a lump sum pay out from a long term investment, you can convert it to regular income immediately with this option

III. Single or Joint Life Annuity

If you are the primary breadwinner in the family, a joint-life annuity will ensure income safety for your spouse after your demise.

Five Reasons you should Buy an Annuity Plan

Buying an annuity plan secures your financial future in many ways. Below are the top five reasons to get an annuity plan:

1. Safety Of Capital

When you plan for retirement, you look for an option that offers a stable and regular income and at the same time, protects your capital. Retirement is not an age where you would like to risk your life's savings by investing in equity. Or any other investment instrument that is market-dependent. During your working years, you invest in different financial instruments, depending on your risk capacity.

The risk capacity nears zero once you retire. Your top priority is the safety of capital, and an annuity plan gives you that. When you buy an annuity plan, the rate is set at the time of purchase which does not change during the payment period. You know how much you will receive post-retirement.

Life insurance pension and annuity plans offer guaranteed benefits even in the case of lifelong pension. Thus, you can rely on these annuity plans for the safety of your retirement funds.

2. Lifelong Income

As mentioned above, life expectancy will increase with time, and you need to invest in products that give life-long income to you. In an annuity plan, you invest a lump sum amount and start receiving annuity post-retirement.

If you buy an immediate annuity, the payment starts immediately, while in the deferred option, you get to decide when you want to start receiving payments. In both the options, you continue to receive lifelong income. Meaning, the annuitant (the person on whose name the policy is) will continue to receive annuity until death.

3. Leave a Legacy

When you buy a retirement plan, one important parameter to consider is - what happens if you die before the benefits start. Pension4Life by Canara HSBC Oriental Bank of Commerce Life Insurance has an option wherein upon your death, the purchase price is given to your beneficiary (purchase price is the value of your investment corpus at the end of the accumulation phase with which you purchased the annuity).

There are other options as well in this plan. For example, on your death, the balance of the purchase price is paid to the beneficiary. The balance gets calculated by subtracting the total annuity instalments paid till death with the purchase price.

4. Joint Holding with Spouse

You can also get an annuity plan as a joint account with your spouse. When you plan your retirement, it is not just about you. Your spouse will depend on you, even if they are independent and working now.

You need to plan your retirement such that even after your death, your partner continues to receive the annuity. The Pension4Life does exactly this for you. In this plan, one continues to receive payments till the death of the last survivor.

5. Critical Illness & Accidental Benefits

Life is full of unexpected events. Though you cannot predict events like critical illness, you can prepare for them. If you are prepared well, the damage will be less, at least financially. Annuity plans other than all the above benefits prepare you to handle critical illness and give you accidental benefits.

Annuity plans like Pension4Life return the purchase price when you are diagnosed with any critical illness, or you meet an accident.

Learn everything about critical illness benefit under life insurance plan.

Role of Annuity Plans in Retirement Goal

In India, it is crucial to have pension plans to meet the contingencies in the future. The life expectancy is likely to increase in the future, which means you will have a longer post-retirement life. You can invest in multiple financial instruments and create a huge corpus, but it may not last throughout your life. An annuity plan provides you with the surety that you will have a fixed source of income until your death.

When you plan for retirement, there are two important goals - the first is to fulfil your dreams like buying a holiday home, going on a world tour, etc. The second is to ensure you don't have to worry about the money and income. You should be able to enjoy every single day of your life without worrying about money. To meet the second type of goal, you can invest in annuity plans.

Canara HSBC Oriental Bank of Commerce Life Insurance offers a Pension4life Plan that frees you from the worry of income post-retirement.

Annuity plans could be the best investment decision for your retirement if you select them wisely. The right decision today will make sure you do not have to depend on somebody else in the golden years of your life and take the burden of finance.

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Frequently Asked Questions (FAQs) for Retirement and Pension Plans

The premium is one of the most important factors to consider before buying a policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the Premium calculator available in the ‘Tools and Calculator’ section of

The Invest 4G plan offers three benefit options to choose from. If you have opted for the Life Option or Whole Life Option, the insurer will pay the nominee(s) death benefit if the policyholder meets with an unfortunate incident. However, in the Life Option with Premium Funding, the policy continues even after the death of the policyholder. The company pays the remaining premiums until the policy matures.

Life is unpredictable and so it is important to prepare for all eventualities. If you regularly save a substantial amount of your income for retirement, the corpus may expand to a comfortable level before retirement. In case you become disabled and are unable to contribute to the retirement plans, most plans will continue to multiply your savings. The amount already accumulated will continue to grow and besides the existing plans you can also choose to invest in pension schemes specifically designed for people with disability.

Investment in ULIPs like Invest 4G plan qualifies for tax deductions under section 80C of the income tax law. The maturity benefits of ULIPs are also tax-exempt under section 10 (10D) of the Income Tax Act, 1961. However, if the premium paid during the policy term is more than 10% of the sum assured, the maturity proceeds will be taxable.

The concept of early retirement is catching up fast in India, but there are no specified ages for early retirement. While in some western countries the age between 35 and 45 is considered favourable for early retirement, in India the ideal age is 45-50 years. With the right planning and investments, it is not very difficult to retire early.

At the age of 35-40, people generally have several responsibilities such as children’s education and various EMIs. It is difficult to spare a substantial amount of income for retirement. Depending upon the needs of the household and the lifestyle, one should aim to save around 40-50% of his/her income. Around 10% of the income should exclusively be allocated for retirement planning. Here are some tips to choose the best retirement plan.

  • Focus on your needs: It is easier to formulate a strategy when the goal is clear. Make an estimate of the amount required to sustain your life. Take inflation into account and zero in on the targeted corpus.
  • Research thoroughly: Conduct thorough research before investing in any financial product. Read the term and conditions properly and try to understand how an investment product fits your needs.
  • Consider different products: The market is awash with all kinds of investment products. Do not follow conventional advice as the need of every person is different. Take into consideration all the suitable products, conduct an objective analysis and then invest.

Owning a house is a cherished dream for many. There are several ways to save for a new house, but in urgent cases, people may be tempted to withdraw from their retirement fund. There are various financial products for retirement planning, and all have different withdrawal rules. In the case of the National Pension Scheme, partial withdrawals for special purposes like buying a house are allowed only thrice during the policy tenure. However, to avail the withdrawal facility, you should be an NPS investor for at least 10 years and you are permitted to withdraw only 25% of your contribution. If you have a PPF account, you can withdraw 50% of the accumulated amount, but only after staying invested for at least 6 years. The Invest 4G plan also allows partial withdrawals after five years of investment.

The quantum of monthly savings depends on the specific needs of the buyer. Financial advisors, however, suggest people save around 15% of the monthly income for retirement.

Retirement plans such as NPS have a very low entry threshold. It is also open to all and anyone can open an NPS account and start saving. A small business can also invest in Invest 4G plan from Canara HSBC Oriental Bank of Commerce for as low as Rs 5000 every month.

The choice between paying off a student loan or start a retirement account is not a difficult one. Starting early for retirement planning has its own advantages but extending the student loan will increase the interest burden. You will have to find a balance between the two. Try to pay off the student loan as soon as possible, but do not hold back on investing in a retirement account.

Most people nominate their spouse to receive retirement benefits in their absence. But a spouse is not automatically entitled to be the beneficiary of a retirement account owned by the other spouse.

Gold is a safe investment asset and investors often flock to the yellow metal to stabilise their portfolios. Holding a small quantity of gold can be considered as the intrinsic value of gold remains intact. You can also choose to have an exposure to gold through ULIPs. ULIP funds invest in a variety of asset classes and some fund options also have a small exposure to gold. You can choose fund options with gold to have a small and indirect investment in gold.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

While there are no explicit rules barring the use of retirement account to finance real estate, it may not be advisable to do so. For instance, you are allowed to avail loan from the PPF account from the third financial year. The loan can be used to finance real estate, but it would defeat the purpose of having a dedicated retirement account.

The government has allowed all central government pensioners to open a joint account with their spouses.

Vesting date or age signifies when your pension plan’s accumulation phase is over and the distribution phase can begin. For example, in a deferred annuity plan, you may have a vesting date which is 10 to 30 years away depending on your age at entry. You will continue to invest or stay invested till the vesting date. After the vesting date or age, you can start receiving the pension or withdraw the money from the plan.

The steps may differ from plan to plan. However, you can buy the online retirement plans following the steps below:

  • Retirement Calculator: Use a retirement calculator to estimate your corpus need and expected monthly investment amount to achieve it
  • Choose Plan: Select the online retirement plan you want to start investing in
  • Contact Information: Fill in the personal details including the contact information. Make sure to put the correct e-mail ID which you can access since all future communication about the policy will take place via e-mail.
  • Define Your Investment: Select the goal, investment term, investment frequency and amount you want to invest (based on the calculator estimate)
  • Select Fund Allocation: Online retirement plans give you the option to invest in multiple assets including equity funds. You can select the ratio in which your premium will be allocated to these funds as per your risk appetite. Then select one of the portfolio rebalancing strategies.
  • Select Withdrawal Plan: You can withdraw money based on set milestone or systematically from the plan after the lock-in period. Select the options for withdrawal as per your plan.
  • Review Plan & Investment Details & Complete the Application Form

You can pay the premium amount before or after completing the application form to start investing.

The best time to plan your retirement is when you are planning your career. However, this may not be the time when you really start investing money for your retirement. You must start investing in your retirement plan as soon as you start earning.

Retirement is the only financial goal you cannot repair with other means of funding like a loan. Thus, developing the habit of investing with every income you have is the best way to have a comfortable retired life.

Insurance allows your family, especially your dependent spouse to continue living without financial worries if anything happens to you. Also, insurance may help you save enough for retirement in case of permanent disabilities. Additionally, life insurance retirement plans allow you to build a good retirement corpus with bonus additions.

Yes, you can change the nominee of the policy anytime you need. If you are using an Electronic Insurance Account (EIA) to manage your policies, you can change the nominees anytime from this account. Otherwise, you can contact the customer care to update the nominations on your policy.

You can opt for auto-debit of the premiums from your savings account. You can also pay the premiums online using your debit card, credit card or a payment wallet.

You can get Rs. 1 Core pension plan using the online retirement calculator. The calculator will assess your eligibility and provide you with the probable monthly or annual investment to achieve the goal. If the amount seems feasible you can complete the purchase online or set an appointment for a qualified advisor to help you in the process.

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