Definition
Return of Purchase Price
Return 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.
ROP annuities trade a lower regular payout for the comfort that the capital is preserved for heirs, making them popular among Indian retirees who want pension income without disinheriting their family. A pure life annuity without ROP pays more but leaves nothing behind.
Under some plans the purchase price can also be returned earlier, for example on diagnosis of a critical illness or at a fixed age. The lower payout reflects the cost of the guaranteed capital return; buyers must weigh higher lifelong income against legacy goals.
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.
- Deferred AnnuityA deferred annuity is a pension product where the buyer pays premiums (lump sum or instalments) now and the regular income begins after a chosen deferment period.
- NominationNomination is the act of naming a person to receive the policy proceeds on the policyholder's death, without transferring ownership of the policy.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.