Is This Deferred Annuity Plan Suited To Your Retirement?

Planning for retirement is a key goal given that it is likely to involve a very large corpus to last for a good 25-30 years. The two stages in the process are the accumulation and withdrawal.

Annuity products of insurance companies look to cater to both phases. The insurance component is, of course, minimal though that ends up as the inviting factor for some investors.

In this regard, Bharti Axa Life Insurance has come up with the new Swabhimaan Retirement Plan, a non-linked, non-participating individual deferred annuity plan with multiple premium payments and pension payout options.

Before you take the decision to opt for this plan, it is important to understand the kind of payouts and yields.

Multiple options

The basic premise of the product is the same as with any deferred annuity product. You pay premiums for a certain period of time. Of course, there are single pay and limited pay options as well.

The minimum age of entry is 45 (35 for a few select options).

There is a deferment period after paying the premium and then the withdrawal starts with annuity payouts.

The regular premium payment option is available for 2 years, 3 years, 5 years, 7 years and 10 years. The deferment period ranges from 2 years to 10 years.

There is a limited payment option for paying premiums for five years and the deferment period options are 7 years and 10 years.

Premiums can be paid in annual, semi-annual, quarterly or monthly modes.

Similarly, the payouts can be received in the above four frequencies.

There are eight annuity options available in the plan: life annuity without return of premium, joint-life last-survivor annuity without return of premium, life annuity with 100 per cent return of premium and joint-life last survivor annuity with return of premium are some usual options.

In addition, they have life annuity with 50 per cent return of premium, life annuity with return of premium on critical illness or permanent disability due to accident or death, life annuity with step up increase after every five years with return of premium and life annuity with step up increase after every 5 years with return of premium and life annuity with return of premium on attainment of age 80 years.

Putting payouts in perspective

The payouts from the deferred annuity product can be better understood with an illustration.

We take the popular option of joint-life (husband-wife) annuity with return of premium to the nominee. This means that the insured person will receive payouts till he/she is alive. Subsequently, the spouse of the person will receive the same payouts till she/he is around. After the spouse’s death, the premiums paid are returned to the nominee.

Let’s say a 50-year-old male invests ₹2.5 lakh annually (a total of ₹25 lakh in 10 years) in the deferred annuity for a period of 10 years. He then starts to receive the pension from the age of 60. His wife is assumed to be 45 currently.

The product illustration indicates ₹2,02,475 as the annual payout for this option.

The male is expected to live till age 80, while his wife is expected to live till she is 85 years old.

Once the insured annuitant dies at 80, his wife receives the annuity payout for the subsequent 10 years, in this example. When the wife dies, the nominee gets the ₹25 lakh premiums paid.

The yield (XIRR) for this scenario works out to 5.9 per cent a year.

Of course, the annuity payout in this example is promised 10 years hence, and so may have been kept relatively low as the interest rate and annuity yield scenario in future may be harder to predict.

For a different perspective, the current 10-year g-sec yield is north of 6.7 per cent.

Also, when ₹2.5 lakh is invested every year for the next 10 years in an instrument giving 7 per cent per annum, the accumulated corpus would be about ₹37 lakh.

If this ₹37 lakh is invested in an immediate annuity (with the same age and longevity assumptions as earlier) offered by NPS providers, a yearly payout of up to ₹2.63 lakh is available and the yield comes to 7.1 per cent.

The Bharati Axa Life Swabhimaan Retirement Plan’s payout and the NPS example cited earlier are not strictly comparable, as the former is the likely yield 10 years hence and the latter is the current yield.

What should investors do?

Saving for retirement can be done in multiple ways. The NPS, especially is a great avenue available at a low cost and is considerably simple. You invest across equities, corporate bonds and g-secs over the years and accumulate a healthy corpus. Subsequently, an immediate annuity can be taken by one of the providers for 40 per cent of the corpus.

Even otherwise, income streams for retirement can be generated by investing in RBI taxable bonds, senior citizens’ savings scheme, longer term g-secs and highly rated (AAA) NBFC deposits, all of which can easily give healthy returns higher than many immediate annuity options. However, the interest rate on these bonds or deposits is subject to change, whereas an annuity payout is maintained at the same levels for life and so is assured.

Investors must ideally look for immediate annuity options that offer yields closer to the prevailing 10-year g-sec yield at any point in time.

Only those comfortable with relatively modest, yet assured returns of Bharti Axa Life’s Swabhimaan Retirement Plan should opt for the product, that too only with any surplus left after exhausting all other avenues.

Published on January 31, 2026