Annuity Plans and The Various Types Of Scheme

Annuity Plans and The Various Types Of Scheme

People today are more aware of the need for planning for their retirement years and start saving and investing earlier on, so that they have a cushion of money to fall back on once they retire. But no matter how much you prepare, there is no way to predict what the future might bring. Moreover, even if you do have previous savings, at retirement you will receive a lump sum from your pension fund, utilizing which in a suitable way can make things more comfortable for you in financial terms.

The best option for retirees who are looking for ways to stretch the money they get from their pension find is to invest it in a suitable annuity plan that combines a great interest rate with a flexibility to match.

There are a few basic types of annuity plans

Single annuity plan: A single annuity plan pays the plan holder a fixed amount of money every month for the entire life of the individual and not the spouse. This plan is ideal for unmarried or widowed individuals. What it means for the plan holder is greater benefits and higher interest rates, which is what most retirees' desire. On the death of the plan holder, the primary sum is returned to the individual's total estate left.

Joint annuity plan: A Joint annuity plan is perfect for couples and it has a number of variations to suit everyone. Generally, if you have invested in a joint annuity plan, you will receive regular payments throughout your life and after your death your spouse will continue receiving all or a certain percentage of the amount that was being paid earlier. Depending on the particular plan you signed up for, on your death your spouse might even receive the entire sum that you initially invested. Many plans allow a joint membership for both spouses. In such cases, on the death of either spouse, the other continues to receive the regular monthly payments as before.

In terms of the payments being made to the plan holder, there are two basic types of annuity plans.

Fixed interest plans: These annuity plans provide the individual with fixed amount of money each month for the entire life of the policy holder or for the period of the annuity. The advantage of this plan is its stability which is why most people opt for the fixed rate plan.

Variable rate plan: In the variable rate plan the amount of interest paid each month varies depending on market trends for the period. Many people prefer this plan due to the possibility of higher returns in some months.

Opting for any annuity plan is a big decision in an individual's life. It is therefore, advisable to seek the advice of a professional in the subject. Furthermore, annuity plans are not for everyone. If you need the money from pension fund immediately and simply can't afford to invest it, then an annuity plan might not be the best option for you.

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