Single-Life Payout

Reviewed by Vineeth | Updated on Aug 27, 2020

Introduction

A pension or annuity plan that is going to pay out the proceeds to only one individual is referred to as a single-life payout. Single-life payout is one of the two options of payout that employers make use of to settle the retirement benefits or proceeds.

When an employee retires, he or she has the option of choosing a single-life payout or a joint-life payout. Under a single-life payout, only the employee will keep receiving the payments for the rest of his life. The payments will stop once the person is no more. Most pension plans follow the single-life payout option.

Breaking Down Single-Life Payout

If an employee does not want to opt for a single-life payout option, then they can alternatively choose to avail a joint-life payout option. Under this option, the payments will continue to flow even after the death of the retiree to someone else. It may be a spouse or children.

Most plans limit the survivor benefits only to the immediate family members. Generally, the payment which is made periodically under the joint-life payout plans will be lower than the amount that is going to be paid out under the single-life payout option. This is because the payments will continue even after the death of the employee or retiree.

Example of Single-Life Payout

Let’s understand the single-life payout option with an example. Consider Mr XYZ serves for fifteen years at a company ABC. He then goes on to retire at the age of 65 years. As per the company’s pension scheme, he is qualified to get a monthly payout of Rs 25,000 under the single-life payout option.

Mr XYZ is going to receive the payments until his death. The payment will terminate when he dies. If Mr XYZ wants the payments to continue flowing into his wife’s account even after his death, then he can opt for a joint-life payout. But, under this plan, the payment receivable is only Rs 20,000.