Annuity plans offer multiple payout options to investors.
Under annuity plans, individuals invest a lump sum for a fixed period of time or for the rest of their lives in return for regular income.
Annuity schemes have emerged as a popular option for people looking for secure and consistent income throughout their retirement years. Many investors are turning to annuity schemes to get financial security to ensure a comfortable future. But, what exactly is the buzz about these schemes and how can they ensure a secure future?
Under annuity plans individuals invest a lump sum for a fixed period of time or for the rest of their life in return for regular income. These schemes generate returns on invested funds, which are then paid back to the investor in installments.
Also read: SBI vs HDFC vs ICICI: Who offers the best FD for senior citizens?
To understand the annuity scheme better, let us compare the schemes offered by State Bank of India (SBI) and Life Insurance Corporation (LIC).
SBI Annuity Deposit Scheme
SBI introduces Annuity Deposit Scheme, where investors deposit a lump sum with the bank and receive monthly payments thereafter. These payments include the principal amount as well as the interest earned on the diminishing principal. Known as monthly annuity installments, these payouts provide a reliable source of income for investors. The deposit tenure ranges from three to ten years, with interest rates matching those of the same tenure deposit. Senior citizens are entitled to additional interest rates, which makes the scheme more attractive.
SBI’s Annuity Deposit Scheme has no upper limit, though the minimum deposit requirement is Rs 25,000. Investors can be eligible for a loan of up to 75% of the remaining amount. This scheme offers portability between all SBI branches.
LIC Annual Plan
On the other hand, LIC offers different types of annuity plans to meet the needs of different categories of investors:
1) LIC New Life Fund Plan: This traditional deferred life insurance plan enables investors to build a retirement corpus by paying regular premiums throughout the policy term. Once the plan matures, annual payments are made.
2) LIC Jeevan Shanti Plan: Offering flexibility and choice, this pension plan allows investors to receive annuities either at the time of policy purchase or at a later stage. With ten annuity options, policyholders can select the payout plan that best suits their income requirements.
3) LIC Jeevan Akshay Saptam: Launched in 2020, the plan offers multiple annuity options to policyholders. Senior citizens can choose a pension payment plan as per their requirement from among 10 options. Under LIC Jeevan Akshaya VII Plan, the pension will be paid till the death of the policyholder. Annuity payments may also start immediately upon purchase of the policy depending on the payment option selected.
Deciding which annuity scheme is a good investment option depends on personal preferences. The life annuity scheme offered by LIC can be suitable for those who are looking for a fixed income that lasts throughout their life. On the other hand, from a return and liquidity perspective, SBI’s annuity scheme presents an attractive option for diversifying retirement funds, especially for individuals who do not rely on it as their primary source of income.
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