One must accumulate wealth that can later be converted into an annuity in order to ensure a regular income after retirement. Such an income can be secured with the help of life insurance and the National Pension System (NPS)’s annuity products.
Annuity from Life Insurance
Life insurance annuities are available in both deferred and immediate forms. You can choose to pay a single premium or a regular premium in a deferred annuity plan. You will receive a pension from the money you worked for during your working years after you retire.
Due to the low premium, this policy is ideal for young people. In fact, a huge corpus will be created by starting early. If the insured passes away during the accumulation period, the nominee will receive a one-time payment.
The insured can convert the maturity amount into an annuity if he lives through the accumulation phase. The customer of a deferred annuity also has the option to convert two-thirds of the corpus into an annuity and take out one-third of it tax-free as a lump sum.
You can buy an annuity with a lump sum invested in an immediate annuity plan and begin receiving a pension immediately after paying the life insurance premium.
This kind of policy works for people who have money from investments like the Employees’ Provident Fund, the Public Provident Fund, payouts from perks, accumulated money from NPS, and even money from selling real estate.
A variable annuity or a fixed annuity are your options. In a fixed annuity, the insurer will pay the same amount until the annuitant passes away. Because it is market-linked, a variable annuity is good for people who like to take risks.
Annuity from NPS
In NPS, subscribers receive 60% of the lump sum upon maturity; the remaining amount is invested for the purchase of an annuity from an appointed life insurance company.
There are five types of annuity plans offered by life insurers: annuity for life for the subscriber, annuity for life of the subscriber and then to the subscriber’s spouse after the subscriber’s death, annuity for life and purchase price returned after the subscriber’s death, etc.
The individual’s marginal tax rate applies to earnings from an annuity.
