Government employees enjoy the benefit of life-long pension where as private companies with high paying salary have no option to provide pension once the employee retires. When an employee retires at a particular age, he is no longer entitled to salary and other benefits. He will be solely dependent on his savings and investment he has made earlier.
Retirement benefits like Provident Fund and gratuity are paid in lump sum after a particular tenure which are often spent too quickly.
If not invested in a right way, one has to suffer during retirement when money is hard to come by.
Pension is one of the ideal methods for retirement benefit because it will form a part of a regular income.
An annuity is a type of pension product specially designed for regular income and steady cash flow during retirement years so that you need not depend on others in your golden age.
The holder of the annuity can decide the frequency of annuity payments- monthly, quarterly, half-yearly or annual.
There are two types of annuities pension plans:
In an immediate annuity, the payment of an annuity from the Insurance Company will start immediately. The premium for immediate annuity should be paid in lump sum in one installment only.
Some of the 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.
Under deferred Annuity policy, the person pays regular contributions to the Insurance Company, till the vesting age or vesting date.
In an Annuity, the person also has the option to pay a single premium. In such case, the fund will accumulate with interest and will be available on the vesting date.
The insurance company will take care of the investment of funds and the policyholder has the option to encash 1/3rd of this corpus fund on the vesting ag /vesting date tax-free. The balance amount of 2/3rd of the fund will be utilized for the purchase of annuity pension.
Some of the popular deferred annuity plans include LIC Jeevan Tarang, LIC Jeevan Nidhi, Bajaj Allianz Swarna Raksha, BSLI Classic Life Plan, New Pension Scheme (NPS) etc.