Retirement planning has become one of the key aspects for individuals. They tend to search or consult to choose the best retirement annuity plan. The Government of India initiated a scheme, the National Pension System, to address this issue. NPS is a voluntary retirement plan where a subscriber can take up to 60% of their accumulated corpus, and the remaining 40% will be used to buy an annuity plan to receive a regular pension after retirement.

So, if an NPS subscriber is looking for an annuity plan for retirement, what are the factors they must know? We’ll explore this in this blog.

NPS Annuity Plan – An Overview

When a subscriber contributes to NPS, after getting up to 60% of their corpus, the remaining 40% must be used to buy an annuity policy at maturity. It is a legal bond between the NPS subscriber and their service provider. They need to pay an upfront amount to purchase a plan and receive a permanent income for the rest of their lives, as per the contract.

Best NPS Annuity Service Provider – How to choose?

There are various Annuity Service Providers (ASPs) in India, and each comes with unique features and advantages. They also add returns to the fund’s value that are given along with regular payouts at the chosen intervals. Subscribers can select the best annuity plan for NPS out of the available options per their preferences.

Types of Annuity Plans in NPS

Let’s have a look at the types of annuity plans available.

1. Annuity for the life of the subscriber: It offers a lifetime income to the NPS subscribers. After the subscriber’s demise, the NPS annuity plan ends automatically.
2. Annuity with life for the subscriber with the return of purchase price: In this plan, the nominee or legal heir of the subscriber can claim the whole amount used to purchase the annuity plan after the subscriber’s demise. This also comes with regular income till the subscriber is alive.
3. Annuity with life for the subscriber with the return of the purchase price on the diagnosis of a critical illness: The subscriber gets regular income till they are alive. But in this plan, the annuitant can claim the entire annuity amount to cover the medical expenses of a serious illness. If the annuitant is not diagnosed with a critical illness during the policy term and passes away, the nominee or legal heir can claim the entire amount used for purchasing the annuity plan.
4. Joint-life annuity for subscriber and secondary annuitant with return of purchase price: The subscriber receives permanent income for life. NPS annuity after the death of the primary annuitant/NPS subscriber is given to the secondary annuitant of the policy. After the death of the secondary annuitant, the nominee or legal heir can claim the entire amount used for purchasing the annuity plan.

How can you save taxes with NPS? Read here.

Features of the Annuity Plans

• Stable Income: Subscribers will get steady income post their retirement, thanks to the annuity plan. Their pension will come after deducting tax; however, their 60% accumulated corpus is tax-free.
• Secured Nominees: Annuity plans help in securing the future of the nominees with a regular pension.
• Low Risk: There is no fear of losing money as they come with lower risk.
• Add-on Benefits: Every annuity service provider offers add-on benefits that can help in increasing the fund’s value over time.

Final Thoughts

When it comes to choosing an annuity plan with NPS, make sure to compare your options and pick the best annuity service provider. This is an excellent way to secure your retirement as well as offer your spouse and dependants adequate funds in your absence.https://www.kfintech.com/why-is-nps-the-best-retirement-annuity-plan/