Annuity & Pension Plans

We do not publish an annuity rate table. Annuity rates are quoted per insurer, per variant, per age and per purchase price. They change without notice. No regulator publishes a grid you can compare. A table here would be stale within weeks and would invite exactly the wrong comparison. What matters is the structure of the product, which does not change.

Why do so many Indians end up buying an annuity anyway?

Because the National Pension System requires it. On normal exit at age 60, at least 40% of the accumulated corpus must be used to buy an annuity. The remaining 60% is paid as a lump sum. A subscriber may put more than 40% into the annuity, but not less.

The tax treatment is where people are caught out. The 60% lump sum is tax exempt, and the amount used to buy the annuity is exempt at the point of purchase. But the annuity income is taxed in the year you receive it, at your slab rate. See PFRDA, exits for the All Citizen Model. NPS is not fully tax-free at the back end. It is deferred.

What are you actually buying with an annuity?

The choice between these is the real decision, and it is irreversible. Once the annuity is issued you cannot change your mind, surrender it, or move it to a better rate later. Every other financial product you own can be exited. This one cannot.

Why is the “return of purchase price” option so popular and so misunderstood?

It feels safe. Your nominee gets the money back, so it looks like you kept the capital and earned an income on it. What you did was accept a much lower monthly payout for decades. In return, a fixed rupee amount comes back at some unknown future date.

That returned amount is not adjusted for inflation. Money returned in 2050 buys far less than the same figure buys today. You have effectively made an interest-free loan for the rest of your life, and taken a lower pension to fund it. For some people that is still the right choice, if leaving capital to a dependant matters more than income. Just make the trade knowingly.

What does inflation do to a fixed annuity?

It is the central problem, and it is arithmetic rather than opinion. A level annuity pays the same rupee amount at 85 as it paid at 60. Twenty-five years of even moderate inflation cuts what that payment buys by a large fraction. Nothing in the contract adjusts for it.

An increasing annuity addresses part of this, at the price of a much lower starting payment. Compare the two over the whole expected term rather than on the first year’s income. Our inflation calculator shows what a fixed sum is worth after a given number of years.

What should you do instead, or alongside?

Split the job. Read retirement planning alongside this page. Annuities are good at one thing — guaranteeing an income you cannot outlive. Use them for the floor: rent, food, utilities, medicines. Fund everything above that floor from assets you still control.

For the controlled part, the sovereign options are usually better value and stay liquid. The Senior Citizen Savings Scheme pays 8.2% for the July–September 2026 quarter, on a five-year term extendable by three, with a ₹30,00,000 cap. Post Office Monthly Income Scheme pays 7.4%. Both rates are reset quarterly by the Ministry of Finance and are current as of 1 July 2026. See SCSS and small savings rates.

Neither is a lifetime guarantee, and that is the honest trade. They can be reinvested at whatever rate exists when they mature. The annuity locks today’s rate for life, which is a benefit if rates fall and a trap if they rise.

How should you choose an annuity if you must buy one?

Get quotes from more than one insurer for the identical variant, same purchase price, same age, same spouse details. Annuity rates differ between insurers, and because the decision is permanent, a small difference compounds for thirty years. Under NPS you may choose the annuity service provider, so use that choice.

Then check three things in the policy document. Whether the payment frequency you want changes the rate. What happens if you die within the first year. And whether the quoted rate is guaranteed from the date of the quote or from the date the money is received. That last one moves.