Annuity schemes have emerged as a popular option for people looking for a safe and consistent income throughout their retirement years. Many investors are turning to annuity schemes to avail financial security in order to ensure a comfortable future. But, what precisely is the buzz about these schemes, and how can they ensure a secure future?
Under the annuity plans individuals invest a lump sum amount in exchange for a regular income for a particular period or the rest of their lives. These plans generate returns on invested funds, which are subsequently paid out in instalments to the investor.
To better understand the annuity scheme, let’s compare the schemes offered by the State Bank of India (SBI) and the Life Insurance Corporation (LIC).
SBI Annuity Deposit Scheme
SBI presents the Annuity Deposit Scheme, where investors deposit a lump sum amount with the bank and subsequently receive monthly payments. These payments consist of the principal amount as well as the interest accrued on the diminishing principal. Known as monthly annuity installments, these payouts provide a reliable income source for investors. The deposit tenure ranges from three to ten years, with interest rates matching those of similar term deposits. Senior citizens are entitled to an additional interest rate, making the scheme even more attractive.
SBI’s Annuity Deposit Scheme has no upper limit, though the minimum deposit required is Rs 25,000. Investors may be eligible for loans of up to 75% of the balance amount. The scheme offers the convenience of transferability among all SBI branches.
LIC Annuity Plans
On the other hand, LIC offers a variety of annuity plans to cater to the needs of different categories of investors:
1) LIC New Jeevan Nidhi Plan: This traditional deferred life insurance plan enables investors to build a retirement corpus by paying regular premiums throughout the policy’s duration. Once the plan matures, annuities are paid out.
2) LIC Jeevan Shanti Plan: Offering flexibility and choice, this pension plan allows investors to receive annuities immediately after purchasing the policy or at a later stage. With ten annuity options available, the policyholders can select the payout plan that suits best their income requirements.
3) LIC Jeevan Akshay VII: This plan launched in 2020 offers multiple annuity options to policyholders. The senior citizens can choose the pension payout plan as per their requirement out of 10 options. Under LIC Jeevan Akshay VII plan pension would be paid until the death of the policyholder. The annuity payment can also start immediately after purchasing the policy depending on the payout option chosen.
Determining which annuity scheme is the better investment option depends on individual preferences. The life annuity scheme offered by LIC may be suitable for those seeking a fixed income that lasts throughout their lifetime. On the other hand, from a return and liquidity standpoint, 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.