Insights on Annuity plans in India
Does anyone have first-hand experience or indirect exposure to Annuity plans?. Is this a good tool for generating fixed income with 50 lakh investment with adding spouse, children as riders for the principle to be passed-onto. The returns would be less (4% to 5%) and will not beat inflation, but, this is seeming to be better than investing in real-estate from a stability and liquidity standpoint (Ex. Dependency on tenants to generate rent versus fixed monthly payouts in annuity). I understand diversifying investment into other options like mutual funds, gold/silver, SIP/SWP can generate higher returns in long term but is annuity worth it for fixed/risk-free investment option. Can I buy annuity for my grandparents to generate fixed income for them and the principle amount eventually passed onto me?. Thoughts?
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There are 4 types with fixed regular payout at different intervals:
Single Life Annuity
Joint Life Annuity
Annuity with Return of Purchase Price
Joint Life Annuity with Waiver of Premium
All payments are dependent on the performance of where the investment is put and these rates are dependent on the RBI repo rate, which fluctuates based on policy and market changes.
Do note they are NOT inflation linked as India do not have these plans and hence, you get a steady same payment rather than changing market conditions.
Why not just open a Short term debt fund and withdraw 5-6% via SWP? Check the current annuity return. If significantly less than ST debt fund, construct your own annuity