Immediate Annuity Plan vs FD
Updated On Aug 26, 2021
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An immediate annuity is the most basic type of annuity. You make one lump-sum contribution. It's converted into an ongoing, guaranteed stream of income for a specified period of time (as few as five years) or for a lifetime. Withdrawals may begin within a year.
A fixed deposit is a financial instrument provided by banks or NBFCs which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account.
Benefit Of Immediate Annuity Plan
Here is a comparison is drawn between immediate Annuity and fixed deposit:
The minimum deposit amount in this scheme will be based on a minimum monthly annuity of Rs 1,000 for the relevant period subject to a minimum value of Rs 25,000. But there is no maximum limit.
An annuity deposit can be made for a period of 36/60/84 or 120 months.
Rate Of Interest
The rate of interest that will be applicable on these deposits will be the same as applicable to term deposits of tenure as opted by the depositor. For example, if you want to do an annuity deposit for five years then the interest rate applicable on five-year FD will be given to the depositor.
Premature Payment/loan Facility
Premature withdrawal is permitted only in case of the death of the depositor. But you can avail of loans up to 75% of the balance amount of annuity on special cases. If you opt for a loan, then future annuity payments will be deposited in the loan account till the entire loan amount is recovered.
Must Read: Top Benefits of PPF
Benefits of Investing In A Fixed Deposit (FD)
Fixed deposit is always a better option to invest in as it is purely designed for your investment and savings related needs. If your intention is to save and invest for the future, it is advisable you invest in fixed deposits.
Purpose Of Buying
Fixed deposit is a pure investment product whereas term insurance is an insurance product. Investment is something that helps you save for the future.
Fixed deposits are best for both short and medium-term investments whereas term insurance plans are designed for long term investments. You can invest for a period of as low as 7 days in fixed deposits.
You can invest a minimum amount of Rs. 1000 in bank fixed deposits there is no case of premiums. Hence a simpler method of investment.
Fixed deposits offer fixed returns on investments and it is mentioned in the beginning when you open your deposit. It depends on the bank regarding their own choice and methods of returns that they want from their customers.
Both fixed deposits and term insurance policies can be withdrawn. You can withdraw your fixed deposits at any time by sending a notification to your concerned bank.
In the case of a fixed deposit the depositor deposits a lump sum amount for a particular tenure- 1 year, 2 years, 5 years or 7 years. At maturity, he/she receives the deposit amount along with interest for the given period.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.