Within the annuity category, the most fundamental choice is timing: do you want the income to start now (immediate annuity), or do you want to keep accumulating for a few more years before income begins (deferred annuity)? The answer maps almost directly to how far you are from retirement.
An immediate annuity is purchased with a lump sum and starts paying income — monthly, quarterly, or annually — within one policy month. There is no accumulation phase. You give the insurer a corpus; they give you a guaranteed lifetime income in return. The rate is fixed at purchase and will not change regardless of how long you live or what happens to interest rates.
A deferred annuity has two phases: accumulation (you pay premiums and the corpus grows) and vesting (income begins). You can choose when vesting starts — at age 55, 60, or 65. During accumulation, funds may grow at guaranteed rates or market-linked rates depending on the plan. The Kotak Retirement Plan is a deferred annuity structure — you choose when you want the pension to begin.
Who should choose immediate annuity: Someone who has already retired or is within 1–2 years of retiring, has a lump sum corpus (from EPF, property sale, maturing savings plan, or inherited funds), and wants to convert that into reliable monthly income immediately.
Who should choose deferred annuity: Someone who is 5–30 years from retirement, earns regular income, and wants to systematically build a retirement corpus while locking in the pension structure from today. The longer the accumulation period, the larger the eventual pension for a given premium.