Are you thinking about how to generate a stable income after retirement? If you’ve been saving through the National Pension System (NPS), now might be the perfect time to lock in your investment for an annuity plan. The current market offers high interest rates, making it an excellent opportunity to ensure a steady monthly income throughout your life. With annuity plans, you can guarantee fixed returns for the rest of your life—even if interest rates drop in the future.
Why Now Is the Best Time to Buy an Annuity
Interest rates fluctuate, but at present, they are relatively high. This means you can invest your NPS corpus into an annuity plan and secure a much higher return. Once your funds are locked in, the interest rate stays fixed, providing you with a stable income every month, regardless of any future decline in rates. Whether you’re planning for a single life annuity (income stops after your passing) or joint-life annuity (your spouse continues to receive income after you), locking in at current rates can provide you with better returns.
But how much can you expect to earn each month if you invest ₹50 lakh today? Let’s dive into the details of current annuity rates offered by leading Annuity Service Providers (ASPs) and how your investment can generate lifelong monthly income.
How Much Monthly Income Will You Earn with a ₹50 Lakh Investment?
Currently, major annuity providers like LIC, SBI Life, and HDFC Life are offering annual returns of 7% or more for annuity plans with a Return on Purchase Price (ROP). On the other hand, non-ROP plans, which do not return the purchase amount to your nominee, offer higher rates—often exceeding 8%.
Below are the estimated monthly incomes based on a ₹50 lakh investment:
Top 5 Annuity Providers with Return of Purchase Price (ROP)
- IndiaFirst Life Insurance Co. Ltd
Annual Return: 7.04%
Monthly Income: ₹29,345.09 - Max Life Insurance Co. Ltd
Annual Return: 7.02%
Monthly Income: ₹29,244 - Bajaj Allianz Life Insurance Co. Ltd
Annual Return: 6.99%
Monthly Income: ₹29,133.88 - ICICI Prudential Life Insurance Co. Ltd
Annual Return: 6.98%
Monthly Income: ₹29,092 - Aditya Birla Sun Life Insurance Co. Ltd
Annual Return: 6.81%
Monthly Income: ₹28,367
Top 5 Annuity Providers Without Return of Purchase Price (Non-ROP)
- Shriram Life Insurance Co. Ltd
Annual Return: 8.32%
Monthly Income: ₹34,653 - Max Life Insurance Co. Ltd
Annual Return: 8.21%
Monthly Income: ₹34,192 - HDFC Life Insurance Co. Ltd
Annual Return: 8.04%
Monthly Income: ₹33,502 - LIC (Life Insurance Corporation of India)
Annual Return: 7.98%
Monthly Income: ₹33,255 - IndiaFirst Life Insurance Co. Ltd
Annual Return: 7.93%
Monthly Income: ₹33,033.62
Types of Annuity Plans Available
Annuity plans can be a little confusing due to the various types available. However, understanding the basic options will help you select the best plan according to your financial needs.
- Single Life Annuity: In this plan, the annuitant receives a fixed monthly income for their entire life. After their death, the income stops, and no further payments are made.
- Joint Life Annuity: This option ensures that not only does the annuitant receive income for life, but after their passing, their spouse will continue to receive a regular income for the rest of their life.
- Return of Purchase Price (ROP): With this plan, after the death of the annuitant, the original amount invested (₹50 lakh in this case) is returned to the nominee. This plan often provides a slightly lower monthly payout compared to non-ROP plans.
- Without Return of Purchase Price (Non-ROP): This plan offers higher monthly income but does not return the invested amount to the nominee after the annuitant’s death.
Tax Benefits on Annuity Plans
Annuity plans also provide some tax benefits under Section 80CCC of the Income Tax Act. You can claim a deduction of up to ₹1.5 lahks on the amount invested. However, the income you receive from your annuity plan is taxable according to your income tax slab.
Why Choose Annuity Plans for Retirement?
The biggest advantage of investing in an annuity is the guarantee of a stable, lifelong income. Once you’ve locked in your funds, your returns stay the same, even if interest rates fall. This protects you from the risk of reinvesting at lower rates in the future. Annuity plans also provide peace of mind, knowing that your spouse will be taken care of financially if you opt for a joint life annuity plan.
Additionally, by investing in annuities, you eliminate the need to constantly monitor and manage your investments. Annuities give you the comfort of regular, hassle-free income during retirement, allowing you to focus on enjoying your post-work years without financial stress.
Final Thoughts: Timing Is Key
With interest rates currently at a peak, now is the ideal time to lock in your NPS savings for an annuity. Whether you choose a single or joint life plan, with or without the return of purchase price, this is your opportunity to secure a higher monthly income for the rest of your life. Investing ₹50 lakh today in the right annuity plan can give you peace of mind and financial security for your retirement years.
(Disclaimer: The purpose of this article is only to provide information, not to recommend investment. Take any investment decision only after consulting your investment advisor.)
