Annuity Deposit Scheme

The Annuity Deposit Scheme allows you to deposit a bulk amount with the bank and receive regular monthly payments over a settled tenure. These payments are called annuity installments and comprise both the principal amount you deposited and the interest earned on the diminishing principal balance.

Annuity deposit plans are a widely chosen option for individuals who are retired or in need of a consistent income stream. They can also serve as a beneficial method for saving towards a particular objective, like funding a child's education or making a significant purchase.

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Top Banks Providing Annuity Deposit Schemes

Several banks in India provide annuity deposit schemes. Here are some of the top banks that offer Annuity Deposit Schemes:

State Bank of India (SBI)
Bank of Baroda (BoB)
Canara Bank
ICICI Bank
HDFC Bank
Axis Bank
Kotak Mahindra Bank
Yes Bank
IndusInd Bank
PNB/ Punjab National Bank

Learn more on annuity schemes offered by the top banks. Check the links from the table below:

SBI Annuity Deposit Scheme	HDFC Bank Annuity Deposit Scheme
ICICI Bank Annuity Deposit Scheme	BOB Annuity Deposit Scheme
PNB Annuity Deposit Scheme	Union Bank of India Annuity Deposit Scheme

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Eligibility Criteria For Annuity Deposit Schemes

To be eligible for the Annuity Deposit Scheme, the applicant must meet the following requirements:

You must be a citizen of India.
You must have a PAN card.
You must be at least 18 years old.
Non-Resident Ordinary and Non-Resident External Savings Account holders are not eligible.

Features of Annuity Deposit Schemes

Here are the key features of Annuity Deposit Schemes:

Type of Account: Term Deposit Account (Single) / Special Term Deposit Account (Joint)
Deposit Amount: Different banks offer different deposit amounts. For instance, SBI's annuity deposit account requires a minimum annuity of ₹1,000/-. The minimum deposit amount is ₹25,000/-, and there is no maximum limit.
Interest Rate: The interest rate is determined by the chosen tenure. For example, SBI offers the highest returns at 7.5% and the lowest at 5.25%. Senior citizens can receive an additional 0.5% on their deposits.
Period: Different banks offer different tenures, typically ranging from 1 to 10 years. Depositors must choose a suitable tenure.
TDS: Tax benefits can be availed under section 80C of the Income Tax Act, 1961.
Loan against the scheme: Not all banks offer the facility of a loan against the annuity deposit scheme.
Nomination (if any): For joint accounts, multiple individuals can be nominated, while single account holders can only nominate one person. (Note: The nomination facility is only available in some cases)

Annuity Deposit Scheme Interest Rates

The following list contains the interest rates for a deposit of ₹1 Crore for both the general public and senior citizens:

Tenure	Existing Interest rate p.a. (Public)	Revised Interest rate p.a. (Public)	Existing interest rate p.a.	Revised interest rate p.a. (Senior Citizens)
7 days to 45 days	5.50%	5.25%	5.75%	5.50%
46 days to 179 days	6.75%<	6.50%	7%	6.75%
6 Months to 210 days	7%	6.75%	7.25%	7%
211 days to 1 Year	7.25%	7%	7.50%	7.25%
1 Year to 455 days	7.5%	7.25%	7.75%	7.50%
456 days to 2 Years	7.75%	7.50%	8%	7.75%
2 years to 3 years	7.75%	7.50%	8%	7.75%
3 years to 5 years	7.25%	7%	7.50%	7.25%
5 years to 10 years	7.25%	7%	7.50%	7.25%

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Note: The interest rate specified is subject to change based on the bank and market conditions.

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Calculation of Annuity Deposit Schemes

An annuity deposit scheme involves selecting a term, which is the duration for receiving monthly payments, ranging from 3 to 10 years. Additionally, you choose an interest rate that determines the amount of monthly income.

The monthly income is calculated using the formula:
Monthly income = Principal amount * Interest rate / Number of payments.

For instance, let’s calculate the monthly income if you deposit ₹5 lakhs in an annuity deposit scheme with a 5-year term and 7% interest rate.

Here,
Principal amount (P) = ₹5,00,000
Interest rate (R) = 7% p.a. (We need to convert this to a monthly rate for the calculation)

Number of payments (N) = Tenure (years) * Number of payments per year = 5 years * 12 months/year = 60 months

Monthly interest rate= R (annual) / 12 = 7% / 12 = 0.5833% (rounded to five decimal places)

Now, let's calculate the monthly income:

Monthly income = ₹5,00,000 * 0.005833 / 60 = ₹583.33 (rounded to two decimal places)

Therefore, your monthly income from a ₹5 lakh deposit with a 7% interest rate for 5 years would be approximately ₹583.33.

Annuity Deposit Calculator

An annuity deposit calculator assists investors in determining the estimated amount they will need as an annuity after retiring. Additionally, investors can use the annuity deposit calculator to estimate the amount of investment required during the accumulation phase to reach their desired accumulated amount at the end of the investment period.

Here are simple steps to use the annuity calculator:

Enter your age.
Enter the monthly investment amount you are planning to deposit.
You can experiment with the variations by entering the expected return on investment, percentage of corpus allocated for pension, and expected return from pension.
You can experiment with the variations by entering the expected return on investment, percentage of corpus allocated for pension, and expected return from pension.

Annuity Deposit Calculator

Here are simple steps to use the annuity calculator:

Enter your age.
Enter the monthly investment amount you are planning to deposit.
You can experiment with the variations by entering the expected return on investment, percentage of corpus allocated for pension, and expected return from pension.
You can experiment with the variations by entering the expected return on investment, percentage of corpus allocated for pension, and expected return from pension.

Purpose of Annuity Deposit Schemes

Annuity plans aim to enhance retirement income or provide supplementary support for the buyer.
They offer a steady stream of money post-retirement, ensuring a comfortable and financially secure life in later years.
Annuities can also be a proactive means to safeguard and support your family during unexpected events.
A well-structured insurance annuity plan can ensure that your spouse and dependents continue to receive regular payments even after you pass away.

Types of Annuity Plans

Annuity plans are of various types based on the time of payout and the amount invested. Here are the different types of annuity plans available in India and their benefits:

Immediate annuity: This type of annuity involves a one-time premium payment, and the individual can start receiving guaranteed payouts immediately after depositing the premium. It is suitable for those who are retiring and need regular income right away.
Deferred annuity: Unlike immediate annuity, deferred annuity starts after a specific date and includes an accumulation phase where the individual builds a corpus before receiving payouts in the vesting phase. It is ideal for those who do not need immediate payouts and want their money to grow for larger payments later.
Fixed annuity: With a fixed annuity plan, the individual makes a fixed initial investment based on a set interest rate and payout period, ensuring a guaranteed sum of money post-retirement without any changes. It is suitable for risk-averse individuals who prefer traditional investments.
Variable annuity: Variable annuities do not guarantee a fixed payout and are linked to the performance of chosen funds, making them suitable for investors with a risk appetite. The National Pension System (NPS) is an example of a variable annuity that does not guarantee fixed payouts like other government offerings.

Other Categories of Annuity Plans

Annuity plans can be further classified into various categories based on the customizations offered by the insurance company. These categories are based on the operating styles of the plans and fall under one of the four main types mentioned earlier.

Lump-sum annuity: Most annuity plans provide periodic payments against a lump-sum investment, but this plan allows the individual to receive a one-time payout. However, access to the lump-sum annuity may be restricted until a specified period has passed, and it may be subject to additional conditions set by the insurance company. The complete retirement benefit may not be available as a lump-sum annuity amount.
Life annuity: Under this type of annuity plan, the individual receives regular payments either monthly, quarterly, or yearly for the duration of their life, with the payouts ceasing upon the buyer's death.
Life annuity with return of purchase price: This annuity plan guarantees payouts throughout the buyer's lifetime. The initial purchase amount is returned to the nominee after the buyer's death.
Annuity payable for a pre-decided term: This type of annuity is only payable for a guaranteed period, such as 5 years, 10 years, or more. Payments are made throughout the term, even if the buyer dies, and cease at the end of the pre-decided term.
Indexed annuity: In an indexed annuity plan, the annuity payout increases by a certain percentage each year to account for inflation, enabling the buyer to cover increased expenses to some extent.
Joint life survivor annuity: This type of annuity covers both the individual and their spouse, with payouts continuing as long as one of them is alive. If both individuals pass away, the nominee may receive the purchase price.

Annuity Deposit Scheme vs Recurring Deposit (RD)

Annuity Deposit Scheme and Recurring Deposit (RD) are two deposit schemes offered by banks, but they have some key differences:

Deposit method: In an Annuity Deposit Scheme, you make a one-time lump sum deposit, whereas in RD, you invest a fixed amount periodically.
Payments: In an Annuity Deposit Scheme, you receive regular monthly payments throughout the tenure. In RD, you get the entire maturity amount and interest at the tenure's end.

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