Definition
Vesting Age
Vesting age is the age at which a deferred pension or annuity plan matures and the policyholder begins receiving regular income.
In Indian deferred annuity and pension plans, the policyholder selects a vesting age at the outset, subject to the insurer's minimum and maximum limits. At vesting, the accumulated corpus is typically used to buy an annuity, often with rules on how much can be commuted as a lump sum.
For pension plans regulated under IRDAI, a portion of the corpus may be commuted (taken tax-free up to limits) while the balance must be annuitised. Choosing the vesting age affects both the accumulation period and the annuity rate available at that future date.
Related terms
- 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.
- CommutationCommutation is the option to take part of a pension corpus as a tax-advantaged lump sum at retirement instead of receiving it all as annuity income.
- Pension PlanA pension (retirement) plan is a life insurance product designed to accumulate a corpus during working years and provide income after retirement.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.