Why Is NPS Annuity Is A Hit Among the Retirement Planning Options?

by Anil Kumar ~ May 07th 2018

In recent years, annuity insurance plans are becoming much popular among young investors. NPL or national pension System is among those investment options investors are badly going after. These plans have emerged as an additional option for those who want to secure their retirement life by receiving a consistent income in the later years of life. In this blog, you will get to know how annuities work and what are the important facts to learn about the same.

How Do Annuity Plans Work?

Under these plans, you invest a desirable amount every month that grows over time to help you during your retirement days. This proves a massive benefit as people usually don’t have a consistent source of income and at times face a financial hardship while making it out with their essential expenses. You can choose you whether want to invest every month, every quarter or once in a year. There are plans providing you the option to choose when you wish to receive the income on your investments. If you’re in your thirties, you can receive a consistent monthly income at the time of your retirement. Even if you are approaching the retirement or have already retired, you can invest an accumulated amount into annuities for retirement and start receiving a fixed monthly income immediately.

Benefits Available Under NPS

  • The annuitants receive a consistent monthly income to spend a comfortable retirement life.
  • This monthly income is provided as long as the annuitant lives.
  • The loved ones can receive the refund of the purchase price if the annuitant passes away before reaching their retirement.
  • Usually, the payable annuity increases at a nominal interest rate of 3 percent per year.
  • At times, the surviving spouse receives half of the payable income for the lifetime if the annuitant passes away early.
  • Some providers also offer 60 percent of the payable income for the lifetime to the surviving spouse of the deceased annuitant.
  • Though it’s very rare but there are companies who offer a 100 percent of the payable income to an annuitant’s spouse.
  • Along with providing a 100 percent of the payable income to an annuitant’s spouse, the purchase price is returned to the beneficiaries after the demises of the last survivor.
  • A 60 percent of the payable income for the lifetime is the default option in most of the annuity plans.
  • NPS provides the annuity every month helping the retirees to plan their expenses efficiently.

Important Points to Know

  • This may sound little weird, but you will receive a smaller income as pension if you opt an annuity at a comparatively young age.
  • The pension income might be reduced if you choose to pay your spouse as well, after your demise.
  • This may be even lower if you choose the ‘return of purchase’ option to get a refund in future.
  • You can also opt for an increasing payment option for your monthly income. In such cases, the initial income is lower which increases gradually.

Questions You Want Ask:

What is the monthly income I will receive after retirement?

There is no fixed return in NPS. The monthly income depends on various parameters including investment amount, duration, retirement age and return rates.

What will happen to my retirement income if I withdraw before reaching 60?

If you withdraw before reaching 60, you have to immediately invest a bigger portion of the amount in annuities and depending on the returns, you will receive a monthly income.

Can I change my annuity service provider?

No, the above mention option is not available under NPS.

Can I invest the total accumulated amount into annuities?

Yes, you can invest any desired amount into annuities.

Are the NPS plans are provided by the Federal Govt.?

No, the Govt. doesn’t provide NPS plans, but they are by insurance companies in collaboration with the Federal Govt.

How can I get an NPS plan easily?

You can receive multiple annuity insurance quotes through the official websites of insurance providers. By talking to an insurance representative, you can get to know more about the offered plans and decide on one that provides the maximum protection.

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