Different kinds of Annuity products available in India ?

• Starting Time of the Annuity
• Type of Pension Amounts offered
• Type of Pension Scheme

Based on the Starting Time

1. Deferred Annuity – Your investment is made into a fund (of your choice) that keeps growing for a chosen period of time.  You can choose the time when to start the pension from. e.g. Invest Rs. 1 crore into a debt fund for the next five years.  It may give you a fund of above Rs. 1.40 crores after 5 years. This fund later provides you with a pension. The pension amount will be higher because the fund size is now bigger, as well as because your age is now more than 5 years ago.
2. Immediate Annuity – Your investment immediately starts giving you a pension without waiting for any period.

Annuities based on Type of Pension Amounts offered

1. Guaranteed (or Fixed) Annuities: This means that the amount of pension that you will receive is fixed for the entire chosen period of the annuity plan, or till death.  There is no change in this amount.  You need to keep in mind that inflation will keep reducing the real value of a guaranteed annuity over time.  At the same time, however, this kind of annuity insulates you against reducing interest rates over time.
2. Variable Annuities: In this type of annuity option, you can choose to keep your investment in a variety of asset classes ranging from most conservative (such as money market, guaranteed fixed accounts, and government bond funds) to more aggressive (such as growth, small cap, mid cap, large cap, capital appreciation, aggressive growth, and emerging markets investments).  Balanced funds with combination of these asset classes are also available. Such an option typically includes a Minimum Guaranteed Annuity.

This kind of annuity plan works like a high-risk, high return plan although it does allow you to switch from one asset class to the other without any cost.   Make sure you know how to manage your fund either yourself or with help from a financial advisor, before you choose a variable annuity plan.

Annuities based on Type of Pension Scheme

1. Life Annuity – Guaranteed pension to the annuitant till the end of his/her life.
2. Life Annuity with Return of Corpus (or Purchase Price) – Guaranteed pension to the annuitant till the end of his/her life, finally the Corpus (initial investment made) is returned to a nominee.
3. Annuity Guaranteed for 5, 10, 15 or 20 years – Guaranteed pension to the annuitant for a fixed period of 5, 10, 15, 20 years.  It stops after that. If the annuitant passes away during the period, the nominee receives the equivalent of the pension for the remaining duration.
4. Annuity Guaranteed for 5, 10, 15 or 20 years, and for life thereafter – Same as above option the difference being that if the annuitant survives the term, he/she continues to get the same pension till the end of his/her life.
5. Life Annuity with Joint Life, Last Survivor – Two individuals receive annuity payments simultaneously until their death.
6. Life Annuity with Contingent Survivor – Annuity is paid to the principal annuitant till his/her death. If the spouse is alive at that time, the annuity is paid to them until their death.
7. Combinations – Some companies also offer combinations of the above options.

Case on Different Types of Annuity Plans