Different Retirement Solutions, a Look at the Different Annuity Options

Actuaries India
Jul 21, 2018 · 3 min read

This content focuses on how retired persons can make money. This content discusses about the current annuity products and how effective are they in providing the right income solution to aged people. In this context it is important to say that the India’s workforce is aging. Many who have joined the workforce decades ago are expected to retire in the coming years. Keeping this in consideration we discuss here about the following things:-

  • Three Pillars of the Retirement System
  • Post retirement needs
  • Current annuity products
  • Solution to the retiring population
  • Products versus requirements
  • Suggested annuity products

In India as and when people retire they tend to face problems. The elder people who retire from job are less supported by their children. You can say that Indian families are gradually shifting from the joint family system to nuclear family system.

Reports suggest that by 2030 the population of retired persons or people aged above 60 years is expected to touch 180 million. People expect to live longer and for that they require money. Observations suggest that for many retired persons the required income is greater than the expected income post retirement and then they confront with difficulties in running their families. Many retired persons face with shortage of funds.

In this context it is important to say that in India the retirement system stands on three pillars. These pillars funded by government, funded by the employer, self-funded.

When we start thinking about our retirement then we also start thinking about other things (post retirement requirements) and they can include the following things:-

  • A stable flow of cash to maintain our living standards.
  • Monthly income to support medical requirements. However, in this context it is relevant to say that often a lump sum amount of money is required for medical treatment.
  • Besides medical expenses retired persons also spend lump sum amount on travel and entertainment.

Composite products are often required

For those who have retired, there are available a host of annuity products which can boost their income after retirement. Some of the annuity products are listed as follows:-

There are accumulation phased annuity products and these include the insurance products, NPS, mutual fund pension plans, deferred annuities, Atal Pension Yojana.

The different annuity based products also include immediate annuities by the insurance companies. These products also include government subsidized plans like the pradhan mantri vaya vandana yojana. These products include the unit linked pension plans as well as the deferred annuities.

The immediate annuities help the retired persons to earn a regular income for a certain period of time. Such annuities can also offer the retired persons regular income for life. The annuities offer a guaranteed income and hence preferred.

Examples of Annuity Options

Following are the examples of annuity options:-

  • Annuity that is payable for life and has a uniform rate.
  • Annuity that is paid for a guaranteed period of time or annuity that is paid for life.
  • Annuity that is paid for life with return of corpus on death of the annuitant.
  • Joint life annuity with 50% or 100% of spouse annuity payable for life.
  • Joint life annuity with cent percent of spouse annuity with return of purchase price.

Other current annuity products include pradhan mantri vaya vandana yojana, atal pension yojana. Retiring people can avail annuity for life. They can avail annuity for life with return of purchase price.

Know More — www.charangupta.com or write to me with feedbacks- amit.charan@charangupta.com

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