What is the difference between Deferred and Immediate Payment of Annuity?

What is the difference between Deferred and Immediate Payment of Annuity?
Annuities are financial products which are sold by financial institutions. They are schemes which accept and grow funds from an individual over a period of time. When it reaches maturity, it pays out a series of payments to the investor.

Annuities are mostly used by pensioners to get a steady flow of income after retirement. After retirement, the income earning opportunity of an individual stops. So, annuities help him to maintain his basic day to day necessities of life even after retirement.

In India, financial institutions like LIC, State Bank of India, South Indian Bank, HDFC Bank, ICICI Bank, Birla Sun Life, Bajaj Allianz etc., provide retirement plans.

A lump sum amount of money is to be given to the institutions for a guaranteed series of payouts. There are two kinds of annuities: one is deferred and the other one is immediate based on the time of payouts by the institutions.

Immediate Annuity Plans

Immediate annuity are those kind of plans where the lump sum amount is given to the institutions and they start paying the annuity right from day one when the payment has been made.

If a person wants to get pension immediately and has lump sum amount of money he can avail pension scheme under immediate annuity plans.

Well known immediate annuity plans are LIC Jeevan Akshay, SBI Life - Annuity Plans, HDFC Life New Immediate Annuity Plan, ICICI Pru Immediate Annuity, SIB Care by South Indian Bank.

Deferred Annuity Plans

In this scheme, the annuity payment is deferred i.e. postponed. Pension starts after a particular period of time.

These plans have an accumulation phase and the distribution phase starts after certain period. In the accumulation phase, you have to invest money in the plan every month in order to accumulate the wealth.

Click here to read Top pension plans in India to consider for investment.

Some of the well known deferred annuity plans include LIC Jeevan Tarang, LIC Jeevan Nidhi, Bajaj Allianz Swarna Raksha, BSLI Classic Life Plan, New Pension Scheme (NPS) etc.

So, while choosing your retirement plan you should choose your plan which suits your need the best.


Story first published: Friday, June 6, 2014, 8:47 [IST]
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