Annuity plans take care of longevity risk, but their rate of return is low

The key attraction of an annuity is the promise of a fixed and regular income after retirement

Those looking for regular and guaranteed income during retirement often invest in annuity plans offered by insurance companies. However, these plans may not quite live up to their promise of ensuring financial security in old age. 

Annuity plans are of two types — immediate and deferred. In an immediate annuity plan, the pension starts as soon as the money is invested. A deferred annuity, on the other hand, has two phases — an accumulation phase where the premium gets invested, and an income phase in which the accumulated corpus is used to buy an immediate annuity plan. 

The key attraction