You are using an older browser version. Please use a supported version for the best MSN experience.

Product Crack: Bajaj Allianz Pension Guarantee plan

LiveMint logoLiveMint 16-05-2014 Deepti Bhaskaran

This is an immediate annuity plan. It gives you periodic income against a lump sum payment.

The options

In a deferred pension product, you begin with an accumulation phase where you pay premiums for a defined period of time. At the end of this period, you get a lump sum, which you give to the insurer to annuitize or to get periodic income. In an immediate annuity plan, you simply give a lump sum to the insurer and get periodic income or annuities.

This plan has six annuity options.

1. Life annuity pays you a fixed income for life and returns nothing to your survivors upon your death.

2. Life annuity with return of purchase price in which the principal amount is returned to your survivors upon your death.

3. Annuity certain for a period of 5, 10, 15, 20 years and life thereafter, pays a fixed income for the pre-defined tenor. For instance, the five-year annuity will pay periodic income for five years. If you die during this time, the payment will go to your nominees until the end of five years. If you outlive the five years, the pension will continue for your lifetime and stop with your death.

4. In the joint life last survivor with 50% of annuity to spouse, you get paid for life and after your death, your spouse will continue to get 50% of the annuity amount for life.

5. Joint life last survivor with 100% of annuity to spouse would pay full annuity amount to the spouse.

6. The last option, called joint life last survivor with return of purchase price on death of last survivor, pays you an annuity and on your death, the spouse is paid the annuity. However, on death of the spouse, the principal is returned to the nominee.

Apart from the options that mention return of purchase price, none of the others return the purchase price or the principal to the nominee.

What does it offer?

The amount of annuity will depend on several factors such as the corpus you offer, annuity option chosen and your age. So, a 60-year-old with `50 lakh corpus will get annuity at 8.77% or around `4.38 lakh per year in the life annuity option, whereas in life annuity with return of purchase price, the rate will drop to 6.71%. For joint life last survivor with return of purchase price on death of last survivor option, the rate of annuity will come to 6.46% or an annuity payout of `3.2 lakh per year. Here the age of the spouse is assumed as 56 years.

Mint Money take

Annuities are not liquid. So, an immediate annuity plan makes sense when you buy it as one of the many products to put together a retirement income. In comparison, there are other immediate annuity products that offer a better rate. For instance, Kotak e-Lifetime Income offers better rates; it offers 7.96% on its life annuity with return of purchase price option for the example above. But it doesn’t have options such as joint last survivor with 50% annuity to spouse and joint life last survivor with return of purchase price on death of last survivor. So, choose the option you like from the Bajaj Allianz plan and then compare that with other immediate plans before you buy.

More From LiveMint

image beaconimage beaconimage beacon