Definition
Annuity Rate
The annuity rate is the amount of regular income an annuity pays per unit of purchase price, fixed at the time of buying an immediate annuity.
Expressed as income per ₹1 lakh (or per ₹1) of corpus, the annuity rate depends on prevailing long-term interest rates, the annuitant's age, and the chosen annuity option (life-only pays the most; joint-life and return-of-purchase-price pay less). Once bought, the rate is locked for life.
Because rates move with interest rates, the timing of annuitisation matters, retiring into a high-rate environment secures more lifelong income. Comparing annuity rates across insurers and options is essential, as small differences compound over a long retirement.
Related terms
- Immediate AnnuityAn immediate annuity is a pension product where the buyer pays a lump sum and starts receiving regular income almost immediately, typically from the next payout cycle.
- Return of Purchase PriceReturn of Purchase Price (ROP) is an annuity option where the original lump sum used to buy the annuity is returned to the nominee on the annuitant's death.
- Joint Life AnnuityA joint life annuity pays income while either of two annuitants (typically a couple) is alive, continuing to the survivor after the first death.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.