Pension Plans terms explained

I hope the information i have shared till now on Pension Plans has been of use to you. In coming posts i will be sharing with you a comparison of various Pension Plans available in the market. But before that, i would like to share with you some important terminologies used in Pension Plans

Immediate Annuity Plans vs Deferred Annuity Plans

Immediate Annuity Plans are ones in which pension commences immediately that is, within one year of having paid the premium. Also the premium is usually a one time premium (also called purchase price).

In case of deferred annuity plans, pension is deferred up to the time decided by policyholder. For example an individual can buy a deferred pension plan, with a tenure of 30 years. In this case his pension will begin after 30 years of buying of policy. The premiums for these policies can also be paid as single or regular premium.

Presently most insurance companies offer deferred annuity plans only. LIC's Jeevan Akshay II is one of the few immediate annuity plans.

Pension Plan Options

1) Life time annuity without return of purchase price :
In this plan, the individual receives as long as he lives. However if the insured dies within 5 yrs of start of annuity, the pension amount is lost.

2) Life time annuity with return of purchase price:
In this plan, the individual receives as long as he lives. In case the insured dies due to an eventuality, the purchase price (basic sum assured+bonuses, if any) is paid out to the nominees.

3) Annuity guaranteed for certain number of years:
Under this option, the individual continues to recieve pension irrespective of the fact whether he is alive or not. The benefit of this plan is that if individual survives this period, he continues to receive pension for the rest of his life.

4) Joint Life or Last Survivor annuity:
In this, individual receives pension till he is alive. In case of an eventuality, the spouse recieves pension amount. In case of death of both, purchase price of annuity is returned to the nominee (in case he opts for a return of purchase price).


Lump Sum Annuity said...

Nice Article, i wants to include some more to this.......

Some of these plans are also growth investment plans with assured Lump Sum Annuity in addition to some health coverage plans, etc. Some investment plans include payment of Lump Sum Annuity to the spouse or any other nominee either at the same rate or at a revised rate.

File Personal Bankruptcy said...

Thanks for such a useful article,it was very informative.

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