Annual Premium Annuity

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Definition:

Annual premium annuity means investing equal amounts in installments annually under an annuity plan. This allows investors to save in parts. The total amount invested keeps growing until withdrawals are made.

Description:

Annuity plans work like pension plans. They provide income after a specified time. There is no limit on the annual premium paid. One can top the annual premium annuity amount at any given time. The increased annual premium will generate a higher annuity amount in the future.

Example:

Hansraj plans to invest to buy an annual premium annuity. He paid Rs.1,00,000/- per year for 10 years under the annuity plan. Hansraj then waited for another 5 years for annuity payback.The annual premium is Rs.1,00,000 and total premium paid is 10 lakhs. The returns on annuity paid back will be in the band of 5-6%.

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