This is not very easy to answer, but let me try to answer this…..

An agent makes much more money in selling you an endowment plan – and promising you tax free returns than in selling you a pension plan. However, all the commission is made in the accumulation phase.

When an agent recommends an immediate annuity, and the client actually buys it, the commission at stake is very less. It is a maximum of 2% – and he has to pay service tax and income tax on that amount. Imagine if he were to recommend an IMMEDIATE ANNUITY, of a reasonable size amount – say Rs. 50L , he ends up making only Rs. 1L as commission. It takes a lot of time, and effort to sell an annuity of Rs. 50L, so he may think that the effort is not worth it. So there is no sales side push.

No client really knows about this product so never asks for it, so again there is no buy side push. 

Even if a person decides to buy an immediate annuity, he will be disuaded by the agent saying “your children will get nothing” and suddenly, the sale is off!

Really there is only one good manufacturer who gives good rates, and he is the govt. owned LIC, and this organisation has no need, or desire to do more business, so again contribution to there being no sales side push.

The media which has little understanding of the insurance, annuity and viaticals business has rarely carried anything about ANNUITY, though I do remember Aarati Krishnan writing something on The Hindu. Chances are that this article is behind a paywall or a registration wall..and hence not accessed by people. So again, there is no traction.

Very few people understand the longevity risk and hence NOBODY themselves feel the need for an annuity product. Amazing how 58 year old men/women tell ‘my brother is lucky, he has a pension’ but will not buy one for themselves. Just cannot explain.

I know one rich couple – they are in business – and do not have medical insurance. The H tells me EVERY YEAR that he should buy medical insurance but NEVER gets around to buying it 🙂

So if you do have a big corpus ….,,,,u know what to do, right?


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  1. Genuine question.
    Annuity is insurance against longevity, Agreed.
    But what about inflation risk ?

    Annuity gives a fixed amount pa till death.
    But inflation is every year, which it eats up the buying power.

    For a person say 60-70 buys an annuity and unfortunately is alive at 90 will be in pretty pretty bad shape cash flow wise.
    S/he needs to invest in children 🙂 to take his/her care in terms of money, health and emotional well being.

    Your thoughts subra jee ?

    Problem with longevity is not remaining sane and productive. Yes will lose out on friends and same age family members too.

  2. @Atiker: Please search for indexed annuities, and talk to LIC (not their agents!) what indexed plans they offer.
    If it is not available from insurers, search for annuity articles from Subra Sir, he’s written how to approach annuities in staggered fashion, depending on age.

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