Annuity

Annuity is a financial product which pays a fixed income at predefined intervals over a period of time, in lieu of premium paid in installments or as a lump sum. The period of time for annuity payments is often one’s retirement years or after reaching a certain age in life.

Example

An annuity insurance product or a pension plan

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Annuity is a preferred risk management tool for retirees or the older population as it mitigates the risk of running out of assets to fall back on in the later years. The annuity payments to the customer are guaranteed by the insurance company which has issued the product.

Annuity products can have features like fixed/variable income (payments), and immediate/deferred payments.