Long-term saving for accomplishing your dreams and fulfilling your commitments is a basic necessity for people in the current uncertain global scenario. Travelling to a foreign destination with family, going on sabbatical for higher studies, peaceful retirement, child education and marriage etc. can be some of the long-term financial commitments that you need to plan extensively.
Different kinds of financial products can provide the right financial support to ensure long-term savings. Deferred annuity plans are one of the best and prominent financial instruments offered by life insurance providers in this regard.
Let us look at four benefits that denote their importance.
What is a deferred annuity plan?
A deferred annuity plan is an insurance product in which the insurer and the buyer will get into an agreement, wherein the buyer will pay a premium amount to purchase an annuity and delay the income payments from the annuity plan until maturity.
You can receive your investment fund and interest earned by opting for different payout options offered by the insurance provider. You can avail it off as a lump-sum amount or as regular income throughout life.
Single payment deferred annuity is a preferred option for people looking to park their retirement funds.
Benefits of deferred annuity plan
It is important to understand the benefits of a deferred annuity plan to best utilize the features for maximum returns.
Guaranteed return on maturity –
Using the deferred annuity plan, you can build your savings regularly to ensure guaranteed income on maturity. Hence, it is extremely safe to invest in the long term. The returns can supplement your retirement income to satisfy your basic needs. You can use the online insurance calculators to decide on the premium amount to receive the desired payouts later in life. For example, if you wish to go on a world tour with your family five years from now, you can decide on the amount required and plan for the investment to accomplish your goal. As the returns are guaranteed, you can decide on the amount with precision.
Different annuity options –
Deferred annuity plans are of different types:
Fixed deferred annuity scheme – The interest rate remains the same, and the interest amount gets deferred until the withdrawal is initiated.
Variable deferred annuity – Your fund is invested in the securities market for reasonable returns based on the risk tolerance level.
Indexed deferred annuity –
It is a combination of fixed and variable deferred annuity plans. As the plan offers a minimum guaranteed return, it is considered fixed. And when invested based on the market index, the returns are variable.
Based on your income and long-term financial goals, you can decide on the type of deferred annuity plan.
Deferred annuity plans in India offer flexible features. For example, the Tata AIA annuity plan helps you choose the mode of annuity payout to suit your financial needs. You can receive it as annual, semi-annual, quarterly or monthly payouts. There is also the option to top up the benefits to increase the payout based on your commitments at different stages in life. Also, there is no limit on the extent of the payout amount you can receive from the annuity plan.
Tax Deferment –
The deferred annuity scheme has two stages: the accumulation and payout stages. During the accumulation stage, the tax earned on the fund’s growth in the annuity plan is tax-deferred until the payout stage. Then, on maturity, the returns will be taxed based on the income tax laws prevailing in the country.
A deferred annuity plan is one of the main financial products that help you save your funds in the long term. It offers guaranteed income, the option to choose from different types, flexible features to customize the plan based on your needs and ensure the returns are tax-deferred. Therefore, the deferred annuity plan helps you put away your funds for the future and ensure that it is available for you when you need it!