Annuities

An annuity is a series of payments, either for a set period or for the rest of the annuitant’s life, which are made in return for a single premium.

The rates of return paid on an annuity vary greatly depending on factors including:

Whether they are paid in advance or arrears,
What happens to the payments if the annuitant dies,
Whether the period of payment is set or indefinite,
The age of the annuitant,
Whether the benefits are deferred, and
Whether the payment remains the same or grows.

There are many types of annuity available, which compose of different combinations of the above options.

Upon purchasing an annuity, the income is typically guaranteed for life. There are also special types of annuity known as with-profits and unit linked annuities which can lead to an increased pension subject to investment returns being good. These are complex and involve taking some risk as the pension can also fall.

Upon death of the annuitant (the person who bought the annuity with their pension) the fund is lost to the pension provider after paying the surviving spouse’s pension [or dependent] (if selected at the outset).