Retirement planning isn’t just about saving money—it’s about ensuring a steady income for your golden years. This is where NPS annuity comes in. When you invest in the National Pension System (NPS), a portion of your accumulated corpus is used to purchase an annuity, ensuring regular pension payouts for life.
At HDFC Pension, we understand the importance of financial security post-retirement and provide tailored annuity solutions to help you enjoy a stress-free retirement.
How Does Annuity Work in NPS?
- When you retire at 60 years, 60% of your NPS corpus can be withdrawn as a lump sum, while the remaining 40% is used to purchase an annuity.
- The annuity ensures monthly, quarterly, or yearly pension payouts, depending on the chosen plan.
- The higher your NPS savings, the better your annuity returns and pension payouts.
Let’s explore the types of annuities available, current annuity rates, taxation, and how to choose the best annuity plan for your retirement.
Types of Annuities Available in NPS
Choosing the right annuity plan is crucial as it directly impacts your retirement income. Here are the four major annuity options available under NPS:
1. Life Annuity
- Provides pension for life to the subscriber.
- No payout after the subscriber’s demise.
- Best suited for individuals without dependents.
2. Joint Life Annuity
- Ensures pension for life for the subscriber.
- After the subscriber’s demise, the spouse continues to receive pension.
- Ideal for married individuals who want to provide for their spouse.
3. Annuity with Return of Purchase Price (ROP)
- Offers pension for life to the subscriber.
- Upon demise, the initial investment amount is returned to the nominee.
- A great option for those who want to leave a financial legacy.
4. Comparison of Annuity Options
| Annuity Type | Pension for Life? | Spouse Pension? | Refund of Initial Investment? |
| Life Annuity | Yes | No | No |
| Joint Life Annuity | Yes | Yes | No |
| Annuity with ROP | Yes | No | Yes |
Which plan is right for you?
- If you want maximum pension, go for Life Annuity.
- If you want to support your spouse, choose Joint Life Annuity.
- If you want to leave a financial benefit for your family, opt for Annuity with ROP.
HDFC Life offers customized annuity solutions to suit your retirement goals. Explore our annuity plans today!
Current Annuity Rates
Annuity rates in NPS vary depending on:
- Age at the time of annuity purchase (higher age = better rates).
- Type of annuity plan chosen (ROP annuities usually have lower rates).
- Market conditions and returns from annuity providers.
Currently, NPS annuity rates range between 5.5% to 7.5% per annum, depending on the chosen Annuity Service Provider (ASP) and annuity type.
HDFC Pension helps you select the best annuity provider for maximizing returns. Check our annuity options now!
ow to Choose the Best Annuity Plan?
Selecting the right annuity plan is crucial for financial security. Here’s what to consider:
- Retirement Lifestyle – Choose a plan that covers your monthly expenses comfortably.
- Tax Efficiency – Consider how your pension income will be taxed (explained below).
- Family Support – If you have dependents, a Joint Life Annuity or ROP may be a better choice.
- Investment Horizon – Deferring annuity purchase can sometimes lead to higher returns.
Taxation of NPS Annuity
Understanding NPS annuity taxation is important to manage post-retirement income efficiently.
Lump-Sum Withdrawal Tax Benefits
- 60% of your total NPS corpus can be withdrawn at retirement, and this entire amount is tax-free.
Tax on Annuity Payouts
- The pension received from annuity is considered income and is taxed as per your applicable income tax slab.
Tax Deductions on NPS Contributions
- Under Section 80CCD(1B), an additional ₹50,000 tax benefit is available apart from the ₹1.5 lakh deduction under Section 80C under old tax regime.
- 80 CCD(2) – Provides tax benefits on employer contributions to an employee. (10% under old tax regime & 14% under new tax regime.
Smart Tip:
To minimize tax liability, consider investing in a mix of tax-free instruments and strategically planning withdrawals.
Want to estimate your annuity payouts? Use the HDFC NPS Calculator today!
Conclusion
Annuity in NPS is a smart choice for securing post-retirement income. Selecting the right annuity option can significantly impact your financial independence.
Key Takeaways:
- NPS requires at least 40% of the corpus to be invested in an annuity to ensure lifelong pension.
- Different annuity options cater to different retirement needs.
- Tax planning and annuity selection can maximize post-retirement benefits.
- HDFC Pension offers expert guidance to help you make the right annuity investment.
Start your retirement planning today! Explore HDFC Life’s NPS Annuity Plans Now.
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