Annuity in NPS: Everything You Should Know

Planning for retirement is one of the most critical financial decisions you will ever make. With increasing life expectancy and rising costs, ensuring a stable income post-retirement is essential. The National Pension System (NPS) offers an effective way to build a retirement corpus, and annuity plans within the NPS framework provide guaranteed monthly income after retirement. This article explores the concept of annuity in NPS, its types, features, benefits, and factors affecting annuity rates, helping you make informed decisions to secure your financial future.

An annuity in NPS refers to the regular monthly income you receive after retirement by investing a portion of your NPS corpus. When you retire, at least 40% of your accumulated corpus must be used to purchase an annuity plan from a Pension Fund Regulatory and Development Authority (PFRDA)-approved insurance provider. This ensures a steady income for life, offering financial stability during your golden years.

Types of annuity investment plans in NPS

Here are the five main types of annuity plans available under NPS:

1. Annuity for life: Provides regular income for the annuitant’s lifetime, but payments cease after their demise.
2. Life with 100% annuity to spouse: Ensures pension payments continue to the spouse after the annuitant’s death.
3. Life with return of purchase price: Offers lifelong pension, with the purchase price returned to the nominee after the annuitant’s death.
4. Life with 100% spouse annuity plus return of purchase price: Pension is paid to the annuitant or spouse, and the purchase price is returned after the last surviving beneficiary’s death.
5. Extended options: Some providers may offer additional coverage for parents or family members, depending on the plan. 

To further enhance your retirement savings, consider investing in Bajaj Finance Fixed Deposits. With competitive interest rates, flexible payout options, and a simple online application process, Bajaj Finance Fixed Deposits offer a risk-free supplement to your NPS investments. Open an FD account. 

Annuity plans under NPS come with several key features that make them an essential part of retirement planning:

Steady income

Investing at least 40% of your NPS corpus into an annuity plan guarantees a regular income for life. This ensures financial stability and helps manage post-retirement expenses effectively.

Withdrawal rules

• At age 60: You can withdraw up to 60% of your corpus as a lump sum (tax-free), while 40% must be invested in an annuity plan.
• Premature exit: If you exit NPS before the age of 60, you can withdraw 20% of the corpus as a lump sum, while 80% must be used to purchase an annuity plan.

Various schemes

NPS offers flexibility in choosing annuity plans tailored to individual needs. You can select options that provide lifelong income, spouse protection, or return of purchase price to nominees.

Here are the key advantages of investing in an annuity plan through NPS:

• Guaranteed lifelong income: Provides steady monthly pension post-retirement.
• Spouse protection: Many plans ensure pension payments continue to the spouse after the annuitant’s death.
• Return of purchase price: Certain plans refund the invested amount to nominees after the annuitant’s demise.
• Tax efficiency: While the lump sum withdrawal is tax-free, annuity income is taxable as per your income tax slab.

Plan your retirement with a fixed monthly income from annuities, and complement it with a Bajaj Finance Fixed Deposit to secure lump sum growth. Earn up to 7.30% p.a. returns. Invest now!

Several factors influence the annuity rates offered under NPS plans:

• Market conditions: Interest rates and economic factors play a significant role in determining annuity rates. Higher rates are offered during periods of high interest.
• Type of plan: Fixed annuities guarantee a stable return, while variable and index-linked annuities depend on market performance.
• Provider policies: Different insurance providers offer varying rates based on their investment strategies and features, such as inflation protection or flexible withdrawal options.

While annuity returns depend on market trends, Fixed Deposits from Bajaj Finance offer consistent returns up to 7.30% p.a., unaffected by interest rate cycles. Check Eligibility.

Purchasing an annuity from NPS is a simple process:

• Upon reaching retirement age, log in to your NPS account.
• Select an annuity plan from PFRDA-approved providers.
• Allocate at least 40% of your corpus to purchase the plan.
• Complete the documentation and payment process to start receiving monthly pension payments.

Looking for flexibility post-retirement?

While annuities offer regular income, park the rest of your corpus in a Bajaj Finance FD and choose payout options that suit your needs. Start with just Rs. 15,000 and earn up to 7.30% p.a. returns. Open FD. 

An annuity plan is an excellent way to ensure financial security during retirement. It guarantees a steady income for life, helping you manage expenses and maintain your lifestyle. Choosing the right annuity plan tailored to your needs is crucial for maximising the benefits of your NPS corpus.

Combine the benefits of an NPS annuity with the safety and high returns of Bajaj Finance FDs to build a retirement portfolio that’s both secure and growth-focused. Open FD Account.

Annuities under the National Pension System are an essential tool for securing a steady income post-retirement. With options like lifelong income, spouse protection, and return of purchase price, annuity plans offer flexibility and financial stability. While NPS annuities provide a reliable income source, it is equally important to diversify your retirement portfolio with low-risk investments like fixed deposits.

For instance, Bajaj Finance Fixed Deposits complement NPS investments by offering assured returns of up to 7.30% p.a. You can choose flexible tenures ranging from 12 to 60 months and opt for monthly, quarterly, half-yearly or annual payouts to suit your financial needs. With a minimum investment of Rs. 15,000 and a 100% online booking process, Bajaj Finance Fixed Deposits are an ideal choice to build a secure retirement corpus.

Start planning for your retirement today by exploring NPS annuity plans and supplementing them with reliable fixed deposit options. Open an FD account.