An annuity is a contract where the person who pays for the annuity (the annuitant) will receive a set amount every year for a certain period. Despite the name annuity, the payments may be made monthly and the cost of the annuity will depend on the likely length of time for which it will be paid.
Most annuities are bought for a lump sum, i.e. single premium, and start immediately – known therefore as immediate annuities. Regular premium annuities are also available.
Annuities are normally expressed in terms of annual amounts payable, though in practice, they can be payable monthly, quarterly, half-yearly or annually. An annuity can be paid in advance or arrears, for example, where an annuity is effected … Read More