The market of annuities has a strong long-term potential in India. According to National Statistical Office (NSO)’s Elderly in India 2021 report, India’s elderly population (those above 60 years) is expected to cross 198 million in 2031 which is a 41 per cent growth over the decade.
A further survey states that only 32 per cent of this population have made investments for this and only about 11 per cent of the income is channelled towards this end. This would mean a higher dependency ratio if savings or planning for retirement is not done right. Thus, annuity along with National Pension Scheme and other pension plans should become a crucial part of the savings landscape in the country going forward.
Annuity products are the only instruments that offer long term and guaranteed return options.
A guaranteed income for life
In a world where life expectancy is increasing, planning for a secure and comfortable retirement has never been more crucial. As Indians live longer, the importance of a reliable retirement income cannot be overstated. A life annuity return of premium (ROP) plan emerges as a powerful solution for those seeking financial security during their golden years.
What are life annuity ROP plans
A life annuity ROP plan stands as a beacon of financial stability in retirement. It’s a specialised type of annuity that ensures a steady income stream for life. With this plan, an insurance company pledges to provide regular monthly or annual payments throughout the lifetime of the customer. The unique feature of a life annuity ROP plan is the assurance that if you pass away your entire premium will be returned to your beneficiaries depending on the option selected at time of purchase.
The benefits
Undoubtedly, the return of premium feature is the linchpin of the life annuity ROP plan’s appeal. Imagine the peace of mind in knowing that if circumstances lead to your early departure, your loved ones will receive the entirety of the premium you invested. This safety net can be invaluable for covering any outstanding expenses and ensuring your legacy lives on.
Flexibility
Furthermore, the return of premium aspect imparts a degree of flexibility to the life annuity ROP plan. In times of financial need like critical illness or some emergencies, there is the option to surrender and access the funds. However, it’s important to note that the full return of premium might not be granted in such instances.
Retirement goals
The journey to a financially secure retirement begins with a clear understanding of your goals. Customers need to assess the amount of income needed to lead a comfortable life during twilight years. Possibilities of any continued liabilities or dependencies during retirement should also be considered while assessing the required income during these years.
By delving into these questions, the customer can pave the way for choosing a life annuity ROP plan that harmonises with their aspirations.
Risk tolerance and financial security
When weighing the options, it’s vital to assess risk tolerance and financial security. If the idea of potentially outliving your income makes one uncomfortable, a life annuity ROP plan could be the answer. However, for individuals with a robust financial position and minimal concerns about outlasting their funds, this plan could provide an excellent avenue to lock in a guaranteed retirement income.
Longevity and health considerations
Longevity and health also play starring roles in the decision-making process. If your health is robust and you anticipate a lengthy life, a life annuity ROP plan aligns seamlessly with your goals. On the other hand, if one has health issues it might be prudent to explore alternative options.
Consulting experts
In the intricate world of financial planning, decisions are never one-size-fits-all. Determining whether a life annuity ROP plan suits one’s needs requires personalised insight. Consulting a financial expert is the wisest course of action. A seasoned professional can meticulously analyse unique circumstances and assist in making a well-informed choice.
For those considering a life annuity ROP plan, diligent research is paramount. Different plans abound, each with varying income amounts, guarantee durations, and associated fees. By equipping yourself with this knowledge, you can ensure your retirement is characterised by financial peace and security.
(The writer is MD & CEO of Shriram Life Insurance Company)
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