Immediate Annuity Plan

What is an Immediate Annuity Plan?

An annuity plan is a financial scheme that provides regular income in exchange for a lump sum or periodic payments to an insurance provider.

An Immediate Annuity Plan is a type of annuity where the policyholder makes a one-time payment to the insurer and starts receiving guaranteed income almost immediately. The payments can begin as early as one month from policy issuance, based on the chosen frequency—monthly, quarterly, half-yearly, or yearly. It is ideal for individuals and retirees seeking a steady income stream. The annuity payout amount depends on factors like the invested lump sum, age, and annuity type, ensuring long-term financial stability.

Features of Immediate Annuity Plan

The key features of this best investment plan for retirement planning are listed below:

• Immediate Income: An immediate annuity plan provides annuity payments as early as the next month after investment.
• Guaranteed Income: This annuity plan ensures a fixed income for life or a chosen period, offering financial stability.
• Market Protection: Your income remains unaffected by market fluctuations, interest rate changes, or economic conditions, making it a secure investment plan.
• No Investment Management: Once you invest, the insurer manages the funds and ensures regular payouts, making it a hassle-free investment option.
• Flexible Payout Options: You can customise your annuity plan with monthly, quarterly, half-yearly, or annual payouts as per your needs.
• Death Benefit Options:
  • With Return of Premium (ROP): In case of the annuitant’s death, the nominee receives the entire premium amount.
  • Without ROP: The annuitant gets a higher pension, but no amount is paid to the nominee after death.
• Joint-Life Annuity: This immediate annuity plan ensures that after the annuitant’s passing, the spouse continues to receive the pension.
• Increasing Annuity: The annuity amount increases over time to help manage inflation, making it a smart investment option for long-term financial security.
• Simple Process: A one-time premium payment secures your future income, and the insurer takes care of the rest, making it a convenient investment plan.

How Does It Work?

An immediate annuity plan works as follows:

• Life Annuity – You receive regular payouts as long as you live. The payments stop after your demise.
• Joint Life with Survivor Annuity – Both you and your spouse are covered. You receive annuity benefits for life, and after your demise, your spouse continues to receive them until their passing.
• Life Annuity with Return of Purchase Price – Regular payouts continue for life. After your demise, the initial investment amount is returned to your nominee.
• Joint Life with Survivor Annuity and Return of Purchase Price – The annuity covers both spouses. After both pass away, the nominee receives the purchase price.
• Guaranteed Annuity for 5/10/15 Years – Payouts continue for a fixed period, even if the annuitant passes away. After the term ends, payments stop.
• Inflation-Indexed Annuity – The payout increases annually to help counter inflation, ensuring a stable yet gradually rising income.

For Example: Mrs. Gupta, a 62-year-old retired teacher, invests her savings in an immediate annuity plan with Life Annuity with Return of Purchase Price (ROP). She receives regular payouts for life, and if she passes away, her initial investment is refunded to her nominee. To protect against inflation, she also chooses an inflation-indexed annuity, ensuring her payouts increase over time. This plan provides Mrs. Gupta with a steady, growing income, ensuring financial security throughout her retirement.

Illustration of Best Immediate Annuity Plans in India in 2025^~

Let us suppose you buy an immediate pension plan from Policybazaar as per the following conditions:

• Your Present Age= 60 years

• You Pay For= One Time

• Starting Pension= Now (next month)

• Plan Type= Annuity Plan

• Specifications= Pension + Return of Purchase Price (ROP)

The list of best immediate annuity plans as per your financial planning are listed in the table below:

• Bajaj Allianz Guaranteed Pension Goal - II
• ICICI Pru Guaranteed Pension Plan
• Tata AIA Saral Pension
• Max Life Smart Guaranteed Pension Plan
• HDFC Life New Immediate Annuity
• Tata AIA Fortune Guarantee Pension
• Kotak Life Lifetime Income Plan

Immediate Vs Deferred Annuity Plan 

The following table highlights the key differences between an immediate pension plan and a deferred annuity plan:

Benefits of Buying an Immediate Annuity Plan

Immediate annuity plans can be a good option for people looking for a secure income stream in retirement. Some of the key benefits of a pension plan are as follows:

• Guaranteed Income: You receive a guaranteed income immediately after purchasing the annuity plan, providing financial stability.
• Lifetime Payments: The annuity can be structured to provide payments for your entire life, ensuring you will not outlive your savings.
• No Market Risk: Unlike investments in stocks or bonds, immediate annuities are not affected by market fluctuations, providing a stable source of income.
• Predictable Returns: You know exactly how much you will receive in payments, making it easier to plan your budget and financial future.
• Protection Against Reducing Interest Rates: The annuity rate is fixed for your entire life and does not change with dropping interest rates of other guaranteed instruments
• Simplicity: Immediate income plans are straightforward and easy to understand, making them a convenient option for retirement planning.
• Customizable Options: You can choose from various payout options and features tailored to your individual needs and preferences.

Right Time to Choose an Immediate Annuity Plan

Choosing the right time for investment varies from person to person. You can choose to buy an immediate annuity plan in the following circumstances: 

• Retirement Planning: Consider buying when you are nearing retirement to secure a steady income stream.
• Guaranteed Income: If you need reliable, fixed monthly payments for the rest of your life, this plan is ideal.
• Risk-Averse Investors: Opt for this plan if you prefer guaranteed returns with minimal market risk.
• Post-Superannuation: Buying an immediate annuity after receiving a lump sum, such as a pension or settlement, helps create a reliable income source.
• Health and Life Expectancy: If you are in good health and expect a long life, this plan can offer peace of mind.

Dedicated retirement planning is crucial to cover your financial needs after your active working life ends. You and your spouse can lead a peaceful, independent life backed by the steady income stream you have ensured through your immediate annuity plan.

Points to Consider While Purchasing an Immediate Annuity Plan

You must essentially survey the market for the various immediate annuity plans on offer to make an informed choice that best suits your needs. It is also sensible to look for additional features and benefits like inflation protection. You must also consider the following essential points before you commit to a particular plan: 

• Provides Lower Liquidity: Annuity purchase is irreversible as the surrender value is low. However, certain insurers provide an option to avail loan against policy to solve your liquidity concerns.
• Judiciously Customize Your Plans: You should ensure you choose the option of single life or joint life, with or without ROP while purchasing the policy. Once purchased the same cannot be altered.

Bottom Line

An Immediate Annuity Plan offers reliable income right after your investment, ensuring financial security during retirement. With lifetime payouts and flexible options like joint annuities, it’s ideal for a worry-free future. Insurers provide competitive returns and customised payout choices. Compare different plans to maximise benefits and guarantee long-term financial stability for your retirement.