Retirement planning in NPS: You can lose Rs 21 lakh in monthly income if you buy an annuity plan worth Rs 50 lakh without comparison
NPS investors have to buy an annuity plan using at least 40% of their retirement corpus from the National Pension System. The monthly pension you can generate out of this corpus will depend on the annuity rate you get. The rates offered by annuity plans vary vastly depending on the annuity service provider.
If you go for an annuity plan without comparing the rates and end up with the lowest rate, you may lose Rs 21.12 lakh on an investment of Rs 50 lakh, on account of annuity income, during a 30-year post-retirement life period, with a joint life annuity option. You can choose from 15 annuity service providers, and benefit from the competition among them if you pay attention to the fine print of their plans .
We explain how you can make the best of your lifetime earnings by going for the most suitable annuity plan.
Your annuity rate will depend on the type of annuity
The quantum of regular pension you receive will change according to the type of annuity plan that you opt for. The part of the retirement corpus of NPS that you use to buy an annuity plan is called the “purchase price”. Many annuity plans come with the feature of returning the purchase price to the nominee when the annuitant dies. This is known as annuity with return of purchase price (ROP). If a plan doesn’t refund the purchase price, it is known as annuity without ROP. Annuity without ROP typically offers a much higher return than annuity with ROP.
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