Buy deferred annuity plan for guaranteed lifetime income

Given the fixed pension amount, invest part of your retirement corpus in growth assets to counter inflation

- SANJAY KUMAR SINGH & KARTHIK JEROME

In a recent master circular on life insurance, the Insurance Regulatory and Development Authority of India (Irdai) allowed partial withdrawals from deferred pension plans for specific reasons, such as higher education or marriage of a child, purchase or construction of a house, and treatment of major illnesses, etc. These withdrawals, permitted only three times during a plan's tenure, cannot exceed 25 per cent of the total premiums paid till the withdrawal date.

Experts say the flexibility to access accumulated savings will make it easier for customers to buy a deferred annuity plan.

"Allowing customers to dip into their accumulated savings gives them the comfort that in the case of specific life events, their pension plan can be used as a safety net," says Srinivas Balasubramanian, chief of product, ICICI Prudential Life Insurance Company.

This facility should be used only in emergencies. "Withdrawing partially from the pension plans may chip away at the long-term sustainability of the pension plan," says Sabyasachi Sarkar, appointed actuary, Go Digit Life Insurance.

How do these plans work?

Two types of annuity plans exist: immediate annuity and deferred annuity. In an immediate annuity, the payout from the plan begins right away. In a deferred annuity, it starts after a gap called the deferment period.

Deferred annuity plans have several variants. One is the single-pay variant where the customer pays a lump sum and gets a pension for a lifetime after the deferment period.