PENSION
&
ANNUITY
Arpit Jakhmola
Guaranteed income for a set period for the rest
of your life.
When you retire, you can use some or all of
your pension savings to buy an annuity.
Immediate annuity:
An annuity where the income phase begins immediately after the premium is paid.
Deferred annuity:
An annuity where payments do not begin until a later date
Life Annuity (Annuity is paid lifelong)
Life annuity with the return of purchase price
Joint life, last survivor without return of purchase price
Joint life, last survivor with the return of the purchase price
Life annuity guaranteed for 5/10/15 years and after that.
Buy from the insurance company.
Certain amount for certain tenure.
Provided by the life insurance company. (different companies are available.)
Usually low, as the company is taking the risk of offering periodic income as long as the annuity
purchaser is alive.
Also, the amount received is taxable.
§DOB and identity proof
§Nominee details
§Bank account details where a transfer is to be made by the company.
National
Pension System
Is a gov initiative offered to all Indian citizens. A small amount of money
is invested over a period of time. On retirement, 60% of the corpus is
allowed to be taken and the rest is given as an annuity
The scheme is compulsory for all central
government employees and some state
government employee
Tier 1 - Restriction on withdrawals and come with tax benefits.
Tier 2 - Can withdraw at any time. No tax benefits.
Tire 3 - Can withdraw after 3 year lock-in period. Tax benefits. Only for
central government employees.
INDIAN CITIZEN (RESIDENT/NON- GOVERNMENT EMPLOYEE (NEW
JOINERS AFTER JAN 1, 2004) ALL OTHERS (TIER I) ALL OTHERS (TIER II)
RESIDENT)
Minimum Age 18 years 18 years 18 years 18 years
Maximum Age 65 years 60 years 65 years* 70 years
Minimum Annual Contribution Rs. 6,000 10% of Basic Salary + DA Rs. 500
Rs. 1,000
14% of Basic Salary + DA (Including
Maximum Annual Contribution Rs. 2,00,000 Rs. 2,00,000 Rs. 2,00,000
Government contribution)
Rs. 500
Minimum Contribution per Time - Rs500 Rs200
Maximum Contribution per Time - - - -
Till 65 years, +3 years contribution window Till 65 years, +3 years contribution window
Tenure Till 60 years Till 70 years
after retirement after retirement
Up to Rs. 1.5 lakh under Section 80CCD(1B) + Up to Rs. 1.5 lakh under Section Up to Rs. 1.5 lakh under Section
Tax Benefit on Contributions Rs. 50,000 under Section 80CCD(1B) + Rs. 50,000 under Section 80CCD(1B) + Rs. 50,000 under Section No separate tax benefit
80CCD(1) 80CCD(1) 80CCD(1)
Tax on Accumulation Exempt from Income Tax until maturity Exempt from Income Tax until maturity Exempt from Income Tax until maturity Exempt from Income Tax until maturity
60% tax-free, 40% taxable (can invest 25% in 60% tax-free, 40% taxable (can invest 25%
60% tax-free, 40% taxable (can invest 25%
Tax on Maturity Withdrawal annuity for further tax in annuity for further tax benefits) Taxable as per income tax slabs
in annuity for further tax benefits)
benefits)
Partial withdrawal allowed after 10 years for Partial withdrawal allowed after 10 years for Partial withdrawal allowed after 10 years for
Withdrawal Options No partial withdrawal
specific purposes specific purposes specific purposes
Exit Options 60% tax-free withdrawal + 40% for 60% tax-free withdrawal + 40% for 60% tax-free withdrawal + 40% for
The full amount taxable upon exit
annuity/taxable withdrawal annuity/taxable withdrawal annuity/taxable withdrawal
ACTIVE-CHOICE INVESTMENT: AUTO-CHOICE INVESTMENT:
Equity (E): Maximum 75% till age 50, Equity starts at 50%, reduces
reduces by 2.5% annually, minimum 2% annually till 10% at 55;
50% at 60+ Corporate Debt starts at 30%,
Corporate Debt (C) and reduces 1% annually till
Government Securities (G) 10% at 55.
Tier II - TTS scheme: Fixed mandate investment with no subscriber choice.
Market-linked returns based on chosen fund allocation.
Equity offers higher returns but higher risk, while government securities offer lower returns with
lower risk.
Tax deduction up to ₹1.5 lakh (Section 80CCD) and an additional ₹50,000 (Section 80CCD(1B))
per financial year.
60% of the corpus tax-free at maturity, with mandatory annuity purchase for the remaining 40%.
Pension from annuity taxed as per income slab.
Tier-II regular accounts are not eligible for tax benefits.
Gains from Tier-II taxed as per income tax rules.
Upon account holder's death, corpus paid to nominee/legal heir.
Option to buy annuity available for nominee/legal heir.
Tier I:
Withdrawal before 60: 80% to annuity, 20% taxed, 60% tax-free if retiring at 60.
After three years, defined expenses can withdraw up to 25% of contributions.
Tier II Regular:
No lock-in period, free deposits and withdrawals.
Tier II TTS:
Three-year lock-in period, no withdrawal limit.
Required documents: PAN, Aadhaar, photograph, canceled cheque.
Online opening available through CRAs (protean, KFINTECH, CAMS).
Thank you
very much!
Presented by Arpit Jakhmola
