Multiple benefits of deferred annuities: How you can choose the right one

Savvy investors can expect to earn better returns by investing in alternatives

With interest rates on fixed deposits (FDs) declining — State Bank of India pays 5-5.4 per cent to non-senior citizens for a 1-10-year tenure — investors are on the lookout for alternatives. One product that is being hawked aggressively is the guaranteed-return deferred annuity plan.

Here, the customer pays premiums for a certain period. For instance, a customer may enter at 50 and pay premiums for 10 years. Payouts don’t begin immediately (hence, the name ‘deferred’ annuity), but at retirement. Thereafter, depending on the option chosen, the customer could receive a fixed payout for his lifetime.

Protection against interest-rate risk