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Variable Annuity

Variable annuity allows you to invest in market-based sub-accounts with tax-deferred growth and optional guaranteed income for retirement.... Read more It offers the opportunity to participate in market performance while helping you build a retirement corpus over the long term. A suitable variable⁴ annuity plan may also provide income options and other benefits to support your retirement planning. Read less

Tata AIA

Shubh Flexi Pension Plan

A smarter retirement solution to support you through every stage of your second innings.

Choose your own mix of guaranteed³and variable annuity⁴

Start annuity immediately or defer it up to 20 years post paying premiums

Flexible Return of Purchase Price¹ to balance income and capital return

Buy Your Retirement Plan

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What is a variable annuity?

A variable annuity insurance plan is a type of annuity that allows you to invest your premiums in market-linked assets, including stocks, bonds, or mutual funds. Depending on the plan, you can either invest in a lump sum or make contributions over a period of time. Many plans also include a death benefit, which may provide financial support to your nominee if you pass away before the payout phase begins.

Unlike a fixed annuity, where the returns are predetermined, a variable annuity plan links a part of your investment to market performance. This creates the scope for higher long-term growth, but it also means the value of your investment may fluctuate. Many times, investors focus only on the growth potential, but it is equally important to understand that market movements can work in both directions.

How does a variable annuity plan work?

A variable annuity plan works through two distinct stages: the accumulation phase and the payout phase. One focuses on building your retirement savings, while the other converts those savings into an income source.

Accumulation phase

This is the stage where you gradually build your retirement corpus. You can start by investing a lump sum or by making regular contributions over time. Once the applicable charges are deducted, the remaining amount is invested in market-linked assets such as stocks, bonds, or mutual funds.

Since these investments are linked to the market, the value of your corpus changes over time. If the markets perform well, your investment may grow. If they do not, the value can decline. Some plans also let you allocate a part of your investment to a fixed-interest option. This can help ensure stability alongside the market-linked portion of your portfolio.

For example, someone in their early 40s who plans to retire at 60 may choose a deferred variable annuity and contribute regularly over the next 15 years. That longer investment period gives the market more time to work, although returns will always depend on market performance.

Payout phase

The payout phase begins when you decide to convert your accumulated savings into retirement income. Depending on the terms of the plan, you may receive the amount as a lump sum, monthly income, or through another available payout option.

Some plans provide fixed payments, while others offer payouts that vary according to the performance of the underlying investments. It is also worth noting that, once this phase begins, most annuity contracts restrict additional withdrawals beyond the scheduled payments.

In simple terms, this is the stage where your accumulated retirement corpus starts offering you returns. Instead of continuing to build savings, you begin drawing income from them. If you do not need the income immediately, a deferred annuity allows your investments to remain invested for longer before the payout phase starts.

Key features of a variable annuity plan

A variable annuity plan combines retirement income with market-linked investment opportunities. While the exact features vary from one insurer to another, most plans include a few common elements that make them suitable for long-term retirement planning.

1. Flexible premium payment options
One of the practical aspects of a variable annuity plan is the flexibility it offers when making premium payments. You can choose an option that fits your financial situation and long-term goals.
- Single pay: Invest a lump sum at the beginning and receive annuity income based on the option you choose.
- Limited pay: Pay premiums for a fixed period, such as 5 or 10 years, while the benefits continue according to the policy terms.
- Regular pay: Make contributions throughout the deferment period before the income phase begins.
This flexibility allows you to plan your investments around your income and retirement timeline rather than following a single payment structure.
2. Potential for market-linked growth

Unlike a traditional annuity, a variable annuity invests part of your premium in market-linked funds. As a result, the value of your investment depends on how those underlying assets perform over time.

Returns are not guaranteed, but many times investors choose this option because it offers the possibility of higher long-term growth. Over a longer investment horizon, this growth may also help reduce the impact of inflation on retirement savings.
3. Guaranteed income component

Many variable annuity insurance plans include a guaranteed³ income component, subject to policy terms and conditions. This provides a minimum level of retirement income even if the market-linked portion of the investment doesn’t perform as expected.

In practice, this combination gives retirees a predictable source of income for essential expenses while still allowing part of their investment to participate in market growth.
4. Option to choose the payout period

Most variable annuity plans allow you to decide when you want your annuity income to begin. Depending on the product, the payout can often be deferred for several years.

Choosing a longer deferment period gives your investment additional time to grow before you start receiving income. For individuals who are still working, this flexibility can support more structured retirement planning.
5. Return of premium feature

Some plans include a return of premium options. Under this feature, if the annuitant passes away, the premium paid may be returned to the nominee, subject to the policy conditions.

This feature helps preserve the invested capital for your family while continuing to support your long-term retirement objectives.
6. A balance between growth and income

A variable annuity brings together two objectives that many retirees look for market-linked growth and regular retirement income. Instead of focusing only on one, it combines both within the same contract.

For people planning a retirement that could last two or three decades, this balanced approach can be useful. It provides an opportunity for long-term growth while also offering features designed to support a steady income.

Types of variable annuity plans

Variable annuity plans are broadly available in two forms. The main difference lies in when you want the income payments to begin.

Immediate variable annuity

An immediate variable annuity starts paying income soon after the premium is paid, often within a month, depending on the policy terms.

This option is generally suitable for individuals who have already retired or expect to retire shortly and need a regular income without waiting through an accumulation period. Depending on the plan, the payout may include a guaranteed³ component along with a market-linked element.

Deferred variable annuity

A deferred variable annuity includes an accumulation phase before the payout begins. During this period, your premiums remain invested, giving your retirement corpus time to grow.

You can choose when you would like the payouts to start, subject to the deferment options available under the plan. This type of annuity is commonly chosen by people who are still working and want to build their retirement savings gradually before drawing a regular income.

Let’s understand a deferred variable annuity example. Suppose someone who is 35 years old and plans to retire at 60 may prefer a deferred variable annuity. The longer investment period provides more time for market-linked investments to grow, although the final value will always depend on market performance.

Advantages and disadvantages of variable annuities

A variable annuity can be a useful retirement plan, but like any long-term financial product, it comes with both advantages and limitations. Understanding both sides helps you decide whether it fits your retirement goals, investment horizon, and tolerance with market fluctuations.

The following table covers the key advantages and disadvantages of variable annuities:

Advantages	Disadvantages
Tax-deferred growth: Your investment earnings grow without immediate taxation. In most cases, tax becomes payable only when you start making withdrawals, allowing your savings to compound over time.	Market risk: Part of your investment is linked to the market, so its value can increase or decrease depending on the performance of the selected funds. Returns are not guaranteed.
No contribution limits: Many variable annuities do not impose contribution limits. This can make them suitable for individuals who want to set aside larger amounts for retirement.	Higher charges: Variable annuities may include policy charges, fund management fees, mortality charges, and other costs that can reduce the overall value of your investment.
Choice of investment options: You can generally allocate your investment across different asset classes, such as equity, debt, or balanced funds, depending on the options available under the plan.	Can be difficult to understand: Investment options, payout choices, riders, and policy terms may appear complex, particularly for someone purchasing an annuity for the first time.
Potential for long-term growth: If the underlying investments perform well over time, the market-linked portion of the plan may generate higher returns than some traditional fixed-income products.	Early withdrawal costs: Making withdrawals before the permitted period may lead to surrender charges, tax² implications, or both, depending on the policy terms.
Regular retirement income: Once the payout phase begins, the accumulated corpus can provide a steady income stream, helping you manage expenses after retirement.	Additional rider costs: Optional benefits, such as enhanced death benefits or guaranteed income riders⁵, usually come with an extra cost.
Optional protection feature: Many plans allow you to add riders⁵ that provide additional financial protection based on your retirement needs.	Limited liquidity: Variable annuities are designed as long-term retirement products, so access to your invested money may be restricted during the policy term.

Conclusion

A variable annuity insurance can be a suitable retirement planning option for individuals who are comfortable with market-linked investments and want the potential to grow their retirement corpus over time. Along with offering regular income during retirement, some plans may also provide features such as flexible premium payment options, death benefits, and deferred payouts. Before investing, it is important to understand the plan's features, associated risks, and policy terms to determine whether it aligns with your long-term financial goals.

What best describes a variable annuity?

A variable annuity is an insurance contract that invests your money in market-linked assets. Its value changes with market performance while giving you the option to receive a regular income during retirement.

What is guaranteed in a variable annuity?

Many variable annuities include guaranteed features, such as a death benefit or a minimum income, subject to the policy terms. However, the investment returns themselves are generally not guaranteed.

Who should invest in a variable annuity plan?

A variable annuity insurance may suit individuals with a long investment horizon who are comfortable with market fluctuations and want retirement savings to have growth potential.

Are variable annuity payouts taxable in India?

Yes. Annuity payouts are generally taxed according to your applicable income tax slab. Eligible premiums may also qualify for tax² benefits under the prevailing tax laws, subject to the prescribed conditions.

The complete name of Tata AIA Shubh Flexi Pension Plan is Tata AIA Life Insurance Shubh Flexi Pension Plan (UIN: 110N209V02) - A Non-Linked, Non-Participating Annuity Plan (Individual/Group)
¹Return of Purchase price means return of all premiums paid excluding any extra premium, any rider premium, taxes and other statutory levies, if applicable.
²Income Tax benefits would be available as per the prevailing income tax laws under old tax regime, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere on this site. Please consult your own tax consultant to know the tax benefits available to you
No Goods and Service Tax shall be applicable on Individual life insurance products as per prevailing laws. Income Tax benefits would be available, subject to fulfillment of conditions of aggregate premium within threshold limit of ₹2.50 Lakh/annum for ULIP and ₹5.0 Lakh/annum for non ULIP Life insurance and maintaining conditions of premium to sum assured ratio as stipulated therein in Section 11, Schedule II (erstwhile Section10(10D)) of Income Tax Act 2025. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere on this site. Please consult your own tax consultant to know the tax benefits available to you.
³The word Guaranteed and Guarantee means the annuity payout is fixed at inception of the policy and will be payable for whole of life or till death of the Annuitant(s).
⁴In case of variable annuity pay-out option, investment risk is partially borne by the policyholder or annuitant.
⁵Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch.
This product is underwritten by Tata AIA Life Insurance Company Ltd.
Insurance cover is available under this product.
In case of non-standard lives, extra premiums will be charged as per our underwriting guidelines.
This plan is not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read Sales Brochure carefully before concluding a sale.
Premium will vary depending on the option chosen
Buying a Life Insurance Policy is a long-term commitment. An early termination of the Policy usually involves high costs, and the Surrender Value payable may be less than the all the Premiums Paid.
In case of POS variant, the product is available with/without medical underwriting as per BAUP (Board Approved Underwriting Policy)
L&C/Advt/2025/Sep/3243