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Business Standard
5 days ago
- Business
- Business Standard
Deferred annuity plans: Lock in steady retirement income with guarantee
Grant Thornton's recently published report titled India's pension landscape: A study on retirement reality and readiness highlights low engagement with annuity plans. It says 76 per cent of respondents had not invested in these plans, despite the role they can play in providing stable post-retirement income. How do they work? In a deferred annuity plan, the customer pays premiums, either once or over several years. This money is invested and grows over time. 'Once a person retires, the corpus turns into a source of income as the person receives payouts. A deferred annuity plan allows a person to get a steady income stream during retirement,' says Casparus J H Kromhout, managing director and chief executive officer (CEO), Shriram Life Insurance. A deferred annuity scheme has an accumulation stage and a payout stage. It is different from an immediate annuity scheme. 'In the latter, the policyholder pays the insurer a lump sum. The company starts paying the policyholder right away, usually within a month or a year,' says Kromhout. A deferred annuity can be either guaranteed-return or market-linked. Lock in returns As a country develops, its interest rates witness a secular decline. 'In a reducing interest rate scenario, a deferred annuity plan locks in the annuity rate in advance, mitigating interest rate changes,' says Maneesh Mishra, chief product and marketing officer, Bandhan Life. Guaranteed return plans provide predictability. 'They can offer investors a fixed return of around 6–7 per cent per annum. The annuity rates are locked in at the time of investment and are not affected by market movements,' says Vivek Jain, chief business officer of life insurance, Policybazaar. For market participation, individuals may opt for unit-linked insurance plan (Ulip)-based deferred annuity plans. 'They offer market-linked growth. At vesting — typically at age 60 — the investor can withdraw up to 60 per cent of the corpus tax-free. The remaining 40 per cent (or more) must be used to purchase an annuity. Alternatively, the entire corpus can be annuitised,' says Jain. A deferred annuity allows the corpus to grow tax-free. 'You only pay taxes when you take the money out. Such a plan helps build a savings habit. Fixed and indexed deferred annuities can protect your principal,' says Kromhout. Payouts impacted by inflation Guaranteed return plans make fixed payouts. 'Do not forget the impact of inflation on retirement expenses. A fixed annuity payout might not keep up with it,' says Abhishek Kumar, Sebi-registered investment adviser and founder, Some of these plans come with high fees. These plans also lack liquidity. 'They levy hefty surrender charges, which can significantly reduce the amount you get back,' says Kumar. For instance, in a policy surrendered within the first seven years, the policyholder may only get around 50 per cent back as surrender value. One would also have to pay tax on the entire surrender value, as it is considered taxable income during the year. Consider risk appetite, return Start by assessing your risk tolerance. 'Based on it, decide whether you want a fixed, indexed or variable annuity scheme,' says Kromhout. Consider the return the plan offers. It should match your retirement needs. Choose between a fixed payout for a set period (five, 10 or 20 years) and a lifetime payout. A fixed payout option usually pays more, but the buyer risks outliving the payouts. Married persons should consider including their spouse in the plan to ensure that payments continue for the latter's lifetime. Check the policy document for charges like surrender charges, annual fees and other costs. Should you buy? Guaranteed deferred annuity plans are suitable for risk-averse investors. 'People aged between 45 and 55, who want a steady income during retirement, should go for these plans,' says Kumar. Mishra adds that one may use deferred annuity to cover at least 60 per cent of expenses in retirement. Kumar says these plans work well for those who have other savings and are unlikely to need early withdrawals. Those who may need liquidity should avoid these plans. 'People who do not have a health cover in their retirement years should also avoid them, as they could end up blocking a large portion of their corpus in annuities and might face liquidity problems during a health emergency,' says Kumar. Finally, compare annuity plans from different insurers, focusing on their payouts and fees.
Time of India
20-05-2025
- Business
- Time of India
Shriram Life Insurance records 20.2% rise in total premium in FY2025
Shriram Life Insurance Company Ltd has recorded a 20.2 per cent rise in its total premium to Rs 4,216 crore for the financial year ending March 31, 2025, on the back of continuous and sustainable momentum across all key areas, a top official said. The company had recorded a total premium of Rs 3,508 crore in the last financial year. The total Assets Under Management for the year ending March 31, 2025, grew to Rs 13,207 crore, as compared to Rs 11,282 crore registered in FY2024. The individual new business APE ( Annualised Premium Equivalent ) surged by 45.3 per cent to Rs 1,289 crore for the financial year ending March 31, 2025, as compared to Rs 887 crore registered in the previous financial year. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Secure Your Child's Future with Strong English Fluency Planet Spark Learn More Undo The growth in the individual new business outpaced the industry's 15 per cent growth, Shriram Life Insurance said in a company statement on Tuesday. "Shriram Life Insurance has moved into a high-growth orbit, and we are seeing continuous and sustainable momentum across all key areas. The visibility for long-term growth is strong, supported by our unwavering commitment to serving the needs of our customers," Shriram Life Insurance MD and CEO Casparus J H Kromhout said. Live Events For the quarter ending March 31, 2025, the company's new business premium grew to Rs 507 crore up by 42 per cent from Rs 357 crore registered in the corresponding quarter of last financial year. The individual new business Annualised Premium Equivalent grew by 40.5 per cent to Rs 482 crore, from Rs 343 crore registered in the same quarter of last financial year. "We are not just expanding in numbers, but also in relevance -- reaching families from the segments of the society that have traditionally been left out of the insurance fold. As we scale further, we remain committed to inclusive growth and long-term value creation," he said. During the financial year ending March 31, 2025, the company settled 61,600 claims in both individual and group policies compared to 58,800 claims made in the last financial year, the statement added.
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Business Standard
19-05-2025
- Business
- Business Standard
We are constantly growing despite industry stagnation: Shriram Life MD, CEO
Our focus is on families in the lower segment, or those families which have a family income in the ₹5-₹15 lakh range only. This segment needs life insurance the most, said Shriram Life MD, CEO Listen to This Article Shriram Life Insurance, promoted by Chennai-based Shriram Group and Africa's Sanlam Group, became one of the fastest-growing life insurance companies in the financial year 2024-25 (FY25), with its individual new business annualised premium equivalent (APE) rising 45 per cent to ₹1,289 crore, outpacing the private industry's 15 per cent growth last financial year. The company's Managing Director and Chief Executive Officer Casparus J H Kromhout, in a video interview with Shine Jacob, talks about its future growth roadmap, focus on the ₹5lakh–₹15 lakh consumer bracket, and rural strategy. Edited excerpts:
