Archive for January 16, 2007

Say no to annuity schemes

Publication: DNA, Mumbai;   Date: January 16, 2007;    Section: Personal Finance;   Page: 6

The net yield on them is not very impressive

Insurance companies have for long played on our fear of old age and sold so-called pension plans to us. But, are these plans the right choice?
Pension plans can be largely divided into two categories: immediate annuities and deferred annuities. An immediate annuity is an actual pension plan, which keeps the sanctity of the word pension in tact. On putting money in an immediate annuity, the insurance company pays the policy holder a certain sum of money at yearly or other regular intervals (monthly , quarterly or semi annually).
On the other hand, deferred annuity, has two main phases — the savings phase in which the premium paid is invested and the income phase in which the corpus that has been accumulated in the savings phase can be utilised to buy an immediate annuity. Though deferred annuities are mostly sold as pension plans and tax-saving devices, for long term financial health, they are best ignored. » Read more..