By Ravi Saraogi & Pushpinder Singh

Framework: We adopt a partial annuitisation framework in which a fraction of the retirement corpus is used to purchase an immediate life annuity, while the remainder is retained in a self-managed portfolio. Using a bootstrap Monte Carlo approach with Indian equity, debt and inflation data, we simulate retirement paths across four portfolio allocations, three annuitisation levels (0, 20 and 40 per cent) and four annuity payout rates (6, 7, 8 and 9 per cent). We also compute money’s worth ratios (MWRs) for immediate annuity products, using a Nelson-Siegel government securities (G-sec) yield curve and two Indian mortality tables, based on annuity quotes collected in May 2026. Findings: First, the effect of partial annuitisation on portfolio failure rates depends critically on the annuity payout rate. At payout rates of 6-7 per cent, annuitisation raises failure rates relative to a fully self-managed portfolio. At approximately 8 per cent, its effect is broadly neutral and depends on the withdrawal rate. At 9 per cent, annuitisation consistently reduces failure rates across all portfolio types. Second, products with return of purchase price (with ROP) are priced close to actuarial fairness across all ages, with MWRs of 0.92-0.98, and offer near-fair-value longevity protection with capital recovery. Third, product selection and the timing of annuitisation matter substantially. The choice between with-ROP and without-ROP products, and the age at which an annuity is purchased, can shift a subscriber from the harmful regime to the neutral or beneficial regime. Implications: Annuity payout rates, product type, withdrawal rates and annuitisation timing must be considered jointly in retirement planning. At retirement age 60, prevailing without-ROP rates place retirees in the neutral-to-harmful regime. Subscribers who defer annuitisation to age 70 or beyond, or select without-ROP products whose payout rates clear the 8 per cent threshold, may obtain longevity protection without sacrificing portfolio sustainability.

Source SSRN