State Bank of India (SBI) vs Life Insurance Corporation (LIC): Know details before investing in annuity deposit scheme

SBI vs LIC: A guaranteed regular income comes to most people’s minds when planning for their retirement years. For those individuals, an annuity scheme can be a beneficial option. They provide assured regular income, as well as a tax benefit. Under an annuity plan, you pay a lump sum in the accumulation period and get regular payments as long as you live. In this article, we will talk about SBI Annuity Deposit Scheme, and LIC annuity schemes. 

For those seeking a monthly income, especially senior citizens, the SBI Annuity Deposit Scheme (ADS) has become a well-liked, secure, and trustworthy option.

When it comes to insurance, the majority of people trust LIC with their money. Even now, when people think of retirement planning, the first name that comes to their mind is the insurance behemoth LIC. 

SBI annuity deposit scheme good for senior citizens

The majority of regular income products only consistently provide interest and, at the end of the term, return the investor’s initial investment. However, SBI ADS gives monthly principal refunds in addition to regular interest payments, much like the EMI of a loan. Customers can deposit a one-time lump sum amount with SBI ADS and get repayment in monthly annuity payments that include both the principal and interest as part of the payout, said Vinit Khandare, CEO and Founder, MyFundBazaar.

SBI Annuity Deposit Scheme vs LIC annuity scheme

SBI Annuity Deposit Scheme has a ten-year duration, making it a medium-term investment from the perspective of regular retirement income. Khandare said that the life annuity from LIC will continue to pay as long as the annuitant is alive, SCSS and POMIS offer a far shorter duration of only five years.

SBI Annuity Deposit Scheme vs LIC annuity scheme. Where to invest?

Each option has advantages and disadvantages, ultimately depending on the investor’s preference.

According to Nirav Karkera, Head of Research, Fisdom, the LIC whole-life annuity plan is specifically designed for pensions. Most pension annuity schemes, including LIC whole-life annuity, offer a lifelong payment option. It means that you can receive payments for as long as you live. 

SBI annuity deposit is different from the pension annuity scheme. It lasts for only ten years. “Here, timing is essential because if you plan to start the scheme when you’re near your retirement or after 60 years, there’s a chance that the money you get from the scheme might not be enough to cover your increasing living and medical expenses due to inflation & the reinvestment risk then will be higher there,” said Nirav Karkera.

If you want a fixed income, opt for LIC annuity scheme

If you want a fixed income that will last throughout your life, consider the life insurance company’s life annuity scheme. “Just ensure the scheme covers a significant portion of your regular income needs. That way, you’ll have a steady source of income for a more extended time,” added Nirav.

SBI annuity scores over LIC

From a pure return and liquidity perspective, an SBI annuity may be a better option for those not relying on it as the primary source of income and wishing to diversify their retirement money.

Nirav Karkera said that there are a variety of other instruments that may prove to be more efficient and effective in solving for retirement and periodic income.

Customers can get a fixed amount every month after depositing a one-time lump sum payment in the SBI annuity deposit scheme. As per SBI official website, a fixed amount is provided to the account holder in equated monthly instalments (EMIs). The EMIs comprise a part of the principal amount as well as interest on the reducing principal amount, compounded at quarterly rests and discounted to the monthly value. You can invest in the annuity scheme for a period of 3 years, 5 years, 7 years, and 10 years.The rate of interest as applicable to theSBI annuity scheme is the same as SBI fixed deposits (FD). At present, SBI offers an interest rate ranging from 3% to 7.10% p.a. to the general public on FD maturing in 7 days to ten years. Senior citizens get 50 bps extra than the general public on these deposits.

LIC annuity plans

LIC offers three annuity plans: Jeevan Akshay – VII, New Jeevan Shanti, and Saral Pension.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.


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Updated: 26 May 2023, 03:15 PM IST

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