Different Types of Annuity Plans

Features and benefits - Types of annuities work

What are the different types of annuity?

Annuities are treated differently and offered in the form of varied plans across the world. In India, annuity plans are divided into five major types, which are as follows:

  • Immediate Annuity

    Ideal for people who are about to embark upon retirement, an immediate annuity plan allows you to pay a one-time lump-sum premium at the beginning of the term and to get regular paybacks generated from the invested amount.
  • Fixed Annuity

    A fixed annuity plan allows you to invest your lump-sum amount to generate pay-outs which will remain the same throughout the investment period. This plan is considered to be a fixed income instruments which are hence considered as a more traditional choice and are hence, ideal for retirement investments as well.
  • Deferred Annuity

    Deferred annuity can be a great addition to your investment portfolio, if you are the kind of investor who saves specifically for long-term events and milestones. This type of annuity plan allows the investors to pay the premium, and then withdraw the benefits at a much later date. This also allows tax deference on your investment, and lets you set aside a defined corpus for access in the future.
  • Lump-sum Annuity

    This type of annuity plans are generally not opted by people who want regular payouts distributed across a stipulated time period as it refers to getting pay-out for the plan as a lump-sum amount at the end of the investment period. It is a great way for people to set aside a corpus for the future, much like the deferred annuity plans.
  • Variable Annuity

    Variable annuity allows for investors to get variable payments spread across the payout periods offered by the plan. The variable payment depends on the returns generated by the investments in which the investors have put their money into, and can result in good or bad returns. This may not be the best annuity plan are looking to invest in annuities to generate a steady regular income.

How different types of annuities work?

Regardless of the type of annuity plan you choose to invest in, there are several different types of payouts and pointers that you need to consider. For instance, you may want to choose between a life annuity plan and a joint life survivor annuity plan, based on the phase of life that you are in. While the former allows you as an individual to receive pay-outs, the benefits will cease after your life. However, a joint survivor annuity plan allows for your spouse to continue getting benefits of the annuity insurance after your lifetime.

Moreover, you can choose the right annuity plan for yourself based on the phase of life you are in, and the goals that you have set based on the returns from your annuity policy.

Features of Annuity Plan

The primary features of annuities, which make them a favoured form of investment are as follows:

  • Risk-Free Investment

    One of the biggest reasons why annuities are such a popular investment option among investors, is that they are mostly very safe financial instruments. For investors who are looking to build a stable portfolio with long-term orientation, annuity plans offer a way to safe-keep their corpus in addition to adding more regular income.
  • Benefit Flexibility

    Another major advantage of annuity plans is that the investors can choose how they want to receive their investment benefits. While some opt to take regular payouts starting immediately, some may want to invest in the plan early but choose to withdraw the benefits at a later stage of life. Furthermore, investors can also choose from receiving fixed or variable benefits out of the plans, based on their preference.
  • Financial Security

    Since it is a great way to continue generating income, one can ensure financial security by investing in annuity plans. As an investor, you can choose how much risk you want to take, and whether you want to take any, at all. This ensures that your money is handled the way you want and that it is kept safe till you are ready to withdraw it. Such amount set aside for future can grant you immense financial security during emergencies and retirement period.

Benefits of Annuity Plan

Opting for the best annuity plan can offer you several benefits such as:

  • Regular Income for Lifetime :

    As highlighted before, annuity plans are a great way to invest for your post-retirement life. This is due to the fact that by simply investing your lifelong earnings in an annuity plan, you can continue getting regular income even after retirement.This helps you park your savings in a plan that will take care of your day-to-day expenses seamlessly even after retirement.
  • Tax Deferral on Income :

    One of the most major benefits of annuities is that you do not have to pay taxes on your investment, unless you start withdrawing your pay-outs. Furthermore, the norms of taxation on annuities are similar to taxation on your regular income, and is hence non-cumbersome on your accumulated corpus.
  • Death Benefits :

    When you opt for a joint annuity policy, you are also securing an income for your spouse in the event of your death. In such annuity plans, the insurance company continues processing the pay-outs of the annuities to the spouse, if the primary investor passes away during the investment period.

Eligibility Criteria of Annuity Plan

The primary eligibility criteria that investors wanting to invest in annuity plans need to consider is as follows:

  • The minimum age for investing in annuity plans differ from provider to provider, however, individuals need to be 18 years of age minimum to qualify for such investments.
  • The maximum age for investing varies from 80-99 years for annuity plans
  • Most providers will also have a pre-defined purchase price for annuity plans

While people approaching retirement are strongly recommended to invest in annuities, others can use it to secure a corpus for their future.


The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale

Consult with your financial advisor before making any decisions on insurance purchase.

*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time’

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Annuity FAQs

When can you withdraw money from an annuity?

Every provider will have a set age after which you can withdraw money from your annuity plan without incurring penalties. It is important to adhere to these timelines unless you need to withdraw the money urgently, in order to retain the benefits of the plan. It is highly recommended that if you have saved your annuity plan for your retirement, you start withdrawing only after that in order to meet the pre-set goals.

Is there an age limit for annuities?

While there is no pre-defined age limit for investing in annuities, most people should do so prior to their retirement or immediately post retirement when they have a corpus to invest and safe-keep. The age limit that is generally specified by insurance companies vary between 18 years to 99 years of age.

Are annuities good for senior citizens?

Annuity policy can be the ideal investment instrument for senior citizens since it allows for them to build a corpus for their life after retirement. It is also a great way to generate income on regular intervals, even after the income stops for senior citizens, thus aiding their financial planning process. Senior citizens also tend to get a higher interest rate on their invested amount making it more lucrative for them.