RetirementFinancial Glossary
Annuity
Definition
A financial product that provides a stream of regular payments in exchange for a lump-sum investment. In India, annuities are commonly purchased at retirement using NPS corpus or pension plan proceeds. Annuity rates depend on your age, type chosen (life, joint life, with return of purchase price), and prevailing interest rates.
Why It Matters
Under NPS rules, 40% of your corpus must be used to buy an annuity at retirement. Current annuity rates in India range from 5-7%, meaning a Rs 40 lakh annuity purchase gives you roughly Rs 2-2.8 lakh per year. Understanding annuity types helps you choose between higher payouts (life annuity, no return) and lower payouts with capital protection.