Online annuity plans earn you at least 3% extra over plans bought from agents
Life after retirement from work is a fantastic journey of self-discovery. Still, you must plan for your second innings in the best possible way. Retirement planning is a multistep process that evolves over time. And to enjoy a fun-filled, comfortable and secured retirement, it is foremost to build a financial cushion that will fund your life after retirement. With people usually living longer these days, it is essential to plan well if you want to continue with the lifestyle you enjoyed before retirement. After retirement, the first essential requirement is to ensure that you have a steady flow of pension to meet your daily expenses. The safest way of earning a steady pension flow post-retirement is investing in annuity plans. By buying annuity plans, you are guaranteed a financially secured future for yourself, your spouse and even your children. Annuity plans are the most trusted way of covering the risk of outliving your retirement corpus. These plans are specifically designed to meet people's long-term retirement needs with a decent corpus for investment.
Annuity Plans – The Best Pick For Retirement Planning
As the name suggests, an annuity policy helps you get a regular monthly pension for life once you make a one-time lump sum investment. There are two basic categories of plans available for customers under annuity plans — deferred annuity and immediate annuity. Under deferred annuity plans, you make a lump sum investment with the insurer and wait for it to grow over 5 – 10 years, after which you start receiving a regular pension. In contrast to deferred annuity plans, under immediate annuity plans, payments begin after making a lump sum investment with the insurer. While immediate annuity products are best recommended for customers over 60 years of age, deferred annuity products are best suitable for customers in their early 50s. The size of your monthly payments is determined by various factors, including the corpus invested and tenure of your payment period.
Annuity plans are the most preferred choice for customers over other retirement plans because not only can they lock-in interest rates for 10, 15, 20, or 25 years, but also for their entire life. Under most other retirement plans, customers can only lock-in interest rates for a maximum of 10 years. With interest rates of other savings instruments like bank fixed deposits and Public Provident Fund falling drastically, investing in annuity plans is a smart move.
Moreover, annuity plans are an excellent way of tackling reinvestment risk – which other investment options lack. They also reduce longevity risk. Most retirement options available in India comes with an investment cap; however, there is no such investment caps or limit when investing in annuity plans. Under different annuity plans available online, one can invest in a policy that guarantees pension for the policyholder and spouse. The invested amount is also returned to the nominee.
One important thing that customers must keep in mind while investing in annuity plans is choosing your payment frequency wisely. Annuity plans give the customers the option of receiving fixed payout at intervals that suit them the best. You may select monthly, quarterly, half-yearly or annual payout as per your financial needs and requirements.
Buy Online To Earn Extra Pension
When planning to invest in an annuity plans, it is always suggested to buy online as annuity plans sold online come with many benefits for customers. The most sought after benefit of buying an annuity plan online is that you receive an extra payout on the corpus invested in comparison to plans bought offline.
For instance, say you invest Rs 10 lakh in an immediate annuity plan which guarantees lifetime pension to you and your spouse and returns the principal invested to your nominee. Now, if you buy this plan online, you will receive a monthly payout of Rs 5128, which adds to Rs 64,100 annually, but if you buy the same plan offline, you will receive a monthly payout of Rs 4961 which adds to Rs 62,100 annually. When purchasing the plan online, you receive Rs 2,000 more per year, over 30 years, and you receive approximately Rs 60,000 more than offline plans. When buying annuity plans online, the customer gets about 3 per cent extra pension on the corpus invested.
Some other benefits of buying annuity plans online include ease of buying as the entire buying process is carried out online. Considering the ongoing pandemic crises, when everyone is avoiding stepping out of their houses unless very important, investing in plans online makes all the more sense.
You do not need to visit the agent to discuss the details and features of different plans; instead, everything can be done online with a few clicks. You can most importantly compare different plans on various important aspects like features, payout amounts, and variants. When buying online, all a customer needs to do is select the annuity plan, transfer the money online and start receiving the payout as per the policy terms and conditions.
The author is Head-Investments BU, Policybazaar.com