Annuity is a product of financial institutions where a regular payment is made to the individual. The payment is made in lieu of the payments made earlier on a regular basis or as a lump-sum. The period when the annuity is funded is called as the accumulation phase and once this phase ends, depending upon the contract, annuity begins, which is the annuitisation phase. This is another type of insurance product, where the insured is entering into a contract with the insurer to get a regular payment after a specific period for a certain period or life-long.
One factor need to understand is the fee associated with these plans and the tax implications. As of now, the fee is approximately 0.5-1% of the invested amount, depending upon the type of plan you purchase. The saving in the annuity plan is tax free but may be taxable at the time of withdrawal. However, in all such savings plan, the tax provision at the time of encashment shall be applicable, which may vary from time to time.
As of now, the Indian insurance companies do not have an option of surrendering (withdrawal or liquidity) the annuity plan.