Annuity
A contract where you pay a lump sum to an insurer and receive periodic income for life.
Annuities are sold by life insurers (LIC, HDFC Life, ICICI Pru). You pay a one-time premium; the insurer pays a fixed (or inflation-adjusted) monthly amount, usually for life. Annuity rates in India are currently low (5% to 6.5% for immediate annuities), and the income is fully taxable. NPS forces you to use 40% of the corpus to buy an annuity at 60. Outside of NPS, most retirees in India are better off with a mix of debt funds, FDs, and dividend-paying instruments.
Inside Finlo
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