Annuity Payment options against Pension Policy

Please guide me as to how to decide about selection of proper option from the following options offered by Pension Plan :

1. annuity as long as one annuitant lives

2. annuity guaranteed for 5, 10, 15 or 20 years and life thereafter

3. annuity with return of purchase price to nominee

4. annuity payable for life increasing at a simple rate of x%

-Vinayak Bapat

Dear Vinayak, each of the option listed by you has it’s own pros & cons.

1. Annuity for life – In this case the annuity amount is highest but the annuity stops the moment, annuitant dies. In this option, If there is a surviving spouse, S/he ‘ll not get any more annuity from the annuity provider. This Option is beneficial to the persons, where no spouse is there to survive or extra provisions are already there for spouse.

2. Annuity Gtd. for a certain period – In this option, the Annuity is provided for a certain period no matter, annuitant is alive or not during the full period. In case of premature death of annuitant, this option ‘ll provide annuity till the gtd. period is over. If the annuitant survives the gtd. period, the annuity ‘ll continue till the death of annuitant & ‘ll stop after her/his demise. This option is beneficial again for persons, where there is a surviving spouse & there is a history of early death in the family.

3. Annuity increasing with a simple rate of 3% – This type of annuity ‘ll provide a small cushion towards inflation in the later part of life. The amount of annuity is lower here than the prev. 2 discussed. Here again the annuity stops after the death of primary annuitant.

4. Annuity with return of purchase price – Under this type, annuity is paid first to annuitant till life than to spouse till life & after that the purchase price is returned to the nominees of the annuitant. The payment in this type of annuity is lowest. This is suitable to the persons who wants to leave a fortune for their heirs after their demise.

Thanks

Ashal

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2 Responses to Annuity Payment options against Pension Policy

  1. Dr.Pradhan says:

    Do I have to pay wealth tax despite paying the tax at source while buying gold from the bank?Thanks,

    • ashalanshu says:

      Dear Dr. Pradhan, if your total wealth exceeds 30L Rs. limit including these Gold purchases from bank, then only you need to pay wealth tax & that to only on the exceeded amount @ flat 1% rate.

      If you want to avoid this wealth tax, please do not invest in Gold coins of banks instead please purchase E-Gold or Gold ETFs.

      Please feel free to discuss if you need more help.

      Thanks

      Ashal

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