Do pension plans start paying annuity or pension immediately?


Do pension plans start paying annuity or pension immediately? If not how long do I have to wait before I start receiving a monthly pension?


Technically speaking pension plans are investment plans that generate a regular income flow for you when you are retired. There are various pension plans based on the pension or annuity offered. To answer your question you can start receiving a pension immediately or wait till your pension plan reaches a certain point depending on your chosen pension plan.

In case you want immediate pension to begin you can opt for immediate annuity plan where you do not need to wait for getting the returns. The pension for such plans starts right away as fixed monthly installments once you pay the lump sum payment of the plan. If you can wait, you should opt for a deferred annuity plan where the premium you pay is pooled and invested to form a corpus. It is then paid back to you after a period of time as specified by you.


Hi Aswani,

There are mainly two types of pension plan.

One is called deferred annuity plan and the other is called immediate annuity plan. In the deferred annuity plan, you keep investing and after a certain time (as agreed by the policyholder), you start getting regular monthly pension out of your accumulated investment in the plan. The accumulated investment includes sum assured, guaranteed return, if any, and the bonus received. This plan is good for people who are still working and can afford to invest certain amount regularly.

In the second type of plan, investors can pay a lump sum amount and start receiving regular monthly income immediately. Immediate annuity plan has many variants. You may opt for receiving a fixed amount for a fixed number of years or for life time. This is good for people who have received a lump sum amount in old age.

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BB Expert