Pension regulator PFRDA, is disappointed with the performance of annuity schemes. Annuity schemes are generally offered by life insurers. Annuity schemes have two phases, the accumulation phase and the distribution phase. Accumulation phase is the time period, when an annuity investor is in the early stages of building up cash value of the annuity.
Distribution phase is the time period, when the annuity plan makes the annuity payout (you get pension from the annuity plan).
You (subscriber), get over 10% returns during the accumulation phase. But you get only 7% return from this annuity plan, during the disbursal phase (distribution phase).Distribution phase is the most important phase of an annuity plan. This is when you get annuity payouts (pension from the annuity plan). With inflation being high (around 6%), there is not much return from an annuity plan.
If you are a subscriber to the NPS, you have to compulsorily annuitant (invest in an annuity scheme), up to 40% of your NPS corpus at retirement. You have to choose your annuity scheme, from a list of life insurers recognized by the PFRDA. If you exit the NPS before you are 60, you have to compulsorily annuitant up to 80% of your accumulated NPS corpus at retirement.In case of your death, your nominee gets the entire accumulated corpus. With annuity not giving very good returns, the PFRDA is looking at other investment avenues, to park the 40% of NPS corpus. One of the options considered by PFRDA, is to allow investors to continue with the existing NPS.
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