Annuity
A product bought from an insurer with a lump sum that pays you a regular income, often for life.
An annuity is how a lump sum becomes a pension. You hand an insurer a sum of money, and it pays you a fixed income, often for life. It’s one of the few ways to make sure the income doesn’t run out however long you live. The trade-off: you usually give up the lump sum for good. In NPS, most non-government subscribers must put at least 20% of the pot into one at exit, per PFRDA’s rules.
Questions people ask
What is an annuity?
An annuity is a product you buy from an insurer with a lump sum. In return, it pays you a regular income, monthly or at another interval, often for the rest of your life. The trade-off is that you usually can't get the lump sum back once it's bought.
Do I have to buy an annuity from my NPS?
For most non-government subscribers exiting at 60 or after 15 years, at least 20% of the pot must buy an annuity under PFRDA's exit rules as amended in December 2025. If the pot is 8 lakh rupees or less, you can take it all without buying one.
How is an annuity different from a systematic withdrawal plan?
An annuity pays a fixed income from an insurer, but the money is no longer yours to take back. A systematic withdrawal plan takes a set amount from your own mutual fund each month, so the money stays yours and can grow, but the income isn't guaranteed.
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