Retirement planning can get quite complex for individuals looking to balance between financial security and flexible plan options to secure their golden years. Many people purchase an annuity or pension plan to ensure a steady income during their retirement days. An annuity plan guarantees regular payments for a lifetime after a lump sum investment.

Reliance Nippon Life Insurance recently rolled out a new deferred annuity plan, ‘Nishchit Pension’, which offers a lifelong regular income, multiple annuity options, liquidity options in case of critical illness or total permanent disability, etc. The plan allows customers to select their annuity start date by deferring the payouts and selecting the frequency of their income payouts (monthly, quarterly, half-yearly, or yearly) as per their needs.

Here’s what the plan has in store for you:

Key Annuity Options

The plan offers five annuity options, each addressing different retirement goals and life scenarios:

1. Single Life Annuity

This option provides the highest guaranteed retirement income for life. For instance, Sukhvinder Singh, a 50-year-old businessman, can invest Rs 10 lakh annually for five years. By deferring income for 10 years, he can ensure a lifelong payout of Rs 5.97 lakh from age 60 onwards. The income ends at his death, with no further benefits.

If Singh passes away during the deferment period, a higher of 110 per cent of the Total Premiums Paid or Surrender Value as of the date of death will be payable, and the policy will terminate. No Death Benefit is payable after the completion of the deferment period.

2. Single Life Annuity with Return of Premium plus CI/TPD benefit

Designed for those who want to ensure a legacy while securing retirement income, this option covers scenarios where the policyholder may suffer from a serious illness or disability. In such cases, the policy can be liquidated for the higher surrender value or total premiums paid. Take the case of Karan Bahl: by investing Rs 10 lakh annually for five years, he would secure a yearly income of Rs 5.13 Lakh from age 60, with the option to withdraw Rs 50 lakh in the event of a critical illness or disability before age 80. Upon his death, his nominees would receive the same sum.

3. Single Life Annuity with Return of Balance of Premium

This option ensures steady income during life and guarantees that if the annuitant passes away, their nominees receive the remaining balance of the total premium minus any income payouts. For instance, Ganesh Mukherjee pays an annual premium of Rs 10 lakh for five years (a total of Rs 50 lakh) and gets a lifelong payout of Rs 5.89 lakh starting at age 60.

Upon his death, the unpaid portion of his total investment is returned to his heirs. This includes death benefits equal to total premiums paid up to the date of death minus the sum of all the income payouts paid to date to him (Ganesh).

4. Joint Life Annuity

For those looking to secure not just their own future but also that of their spouses, the joint life annuity option guarantees payouts for both annuitants as long as either is alive. For example, Ganesh (primary annuitant) and his wife Ruchita (secondary annuitant) opted for this option. After Ganesh’s death, Ruchita would continue to receive Rs 5.16 lakh per year for the rest of her life.

5. Joint Life Annuity with Return of Premium plus CI/TPD Benefit

Under this package, the plan covers both spouses and ensures payouts continue until both pass away. If either is diagnosed with a critical illness or permanent disability, they can liquidate the policy. In the case of Ganesh, his investment guarantees a payout of Rs 4.79 lakh from age 60 with the option for Ruchita to continue receiving payments upon his passing. Additionally, a legacy sum of Rs 50 lakh would be paid to their heirs after the death of both.

How Do Flexibility and Liquidity Work?

The Nishchit Pension gives the option of liquidity. With the CI/TPD benefit, policyholders diagnosed with one of the covered illnesses or disabilities can liquidate the policy (see examples above), ensuring immediate financial relief. Moreover, if a policyholder fails to pay premiums, there are provisions for a grace period (30 days and 15 days for monthly mode policies) and the option to revive lapsed policies under certain conditions.

Reduced Paid-Up Benefit: If all due premiums have been paid in full at least for the one policy year and no future premiums are paid, the policy will continue as a Reduced Paid-up Policy. The benefits would be reduced proportionately to the total number of premiums paid and the total number of premiums payable in the policy.

Premium Payment Frequency: Policyholders have the option to pay premiums either yearly, half-yearly, quarterly, or monthly. The plan allows quarterly and monthly frequencies only if the premiums are paid electronically, like through ECS/NACH or online payment. For monthly frequency, the first two months’ premiums will be collected in advance at the time of the policy’s issuance.

The loading period in case the frequency of payment is 1 per cent for half-yearly, 2 per cent quarterly and 4 per cent for monthly payments.

Key Terms You Should Know:

1. Deferment Period: The deferment period is the time between the start of the policy and the first payout. It can vary depending on the plan chosen and must be longer than the premium payment term.

2. Grace Period and Lapse: Policyholders have a 30-day grace period to make premium payments (15 days for monthly modes). The policy lapses if the first year’s premium is not paid in full. Lapsed policies provide no benefits unless revived within five years.

3. Reduced Paid-Up Benefit: If premiums are paid for at least one year and then discontinued, the policy will become “reduced paid-up,” meaning the benefits will reduce proportionally based on the number of premiums paid.

4. Revival: Lapsed or reduced paid-up policies can be revived within five years by paying the outstanding premiums with interest. The revival interest rate for the financial year 2024-25 is 8.75 per cent.

5. Surrender Value: Policies acquire a guaranteed surrender value if two consecutive years of premiums are paid. In some cases, particular surrender values apply after one year.

This plan offers a range of options to suit different retirement needs. Before choosing a pension plan, make sure you understand what it provides and how it aligns with your retirement goals.