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Life annuity |
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Life annuityAn annuity that pays a fixed amount for the lifetime of the annuitant.Life annuity Similar MatchesAnnuityAnnuityThe payment of a regular income by a life company to an annuitant in exchange for a lump sum either for life or shorter periods.Annuities are typically used for pensions and the individual receiving the annuity is known as an annuitant. In the UK they can broadly be classified into two types:A Compulsory purchase annuity which is bought from the proceeds of a pension fund and is taxable as earned incomeA purchased life annuity which is bought with an individual's own capital and is taxed at a lower rate than a compulsory purchase annuity.There are three different types of pension annuities, commonly referred to as standard annuities, with-profits annuities and unit-linked annuities.Standard pension annuities are the most commonly purchased and account for over ninety percent of the UK market. The income from a standard pension annuity is guaranteed for the rest of the annuitant's life whereas the income from a with-profits or unit-linked annuity will fluctuate depending on the investment performance of the underlying assets. There are various options which can be provided including:Annuity certain: Income is paid for a given period whether or not death of the individual occursDeferred annuity: Income which does not commence until some future specified dateEscalating annuity: Income which increases annually by a given amount, for example 3%. The choosing of this option results in lower income compared with a level annuity over the initial yearsImmediate annuity: An annuity which starts to pay income soon after it has come into operation, for example at the end of the month following the payment of the lump sumJoint life annuity: Income usually relevant to two people (for example man and wife) which continues until the death of the first person onlyJoint life and survivor annuity: Income usually relevant to two people (for example man and wife) which continues until the death of the second personLevel annuity: Income which is paid at a fixed rate throughout the life of the individual. See also guaranteed minimum periodTemporary annuity: Income is paid either for a fixed period or until earlier death. Tax sheltered annuityTax sheltered annuityA type of retirement plan under Section 403(b) of the Internal Revenue Code that permits employees of public educational organizations or tax-exempt organizations to make before-tax contributions via a salary reduction agreement to a tax-sheltered retirement plan. Employers are also allowed to make direct contributions on behalf of employees. Annuity factorAnnuity factorPresent value of $1 paid for each of t periods. Fixed annuityFixed annuityIn the US, an annuity which guarantees payments to an annuitant which are fixed for life or a specific period. Similar to a level annuity in the UK. Immediate payment annuityImmediate payment annuityAn annuity contract paid by a single payment and with a specified payment plan the starts immediately after the contract is purchased. Further Suggestionsreverse annuity mortgageannuity deferral joint life and survivor annuity joint life annuity purchased life annuity annuity certain Annuity in arrears Qualifying annuity Deferred nominal life Annuity Equivalent annual annuity variable annuity Hybrid annuity Single life annuity Annuity due Joint and survivor annuity Single Premium Deferred Annuity (SPDA) annuity starting date Annuity starting date Normal annuity form Annuity certain Period certain annuity Combination annuity temporary annuity compulsory purchase annuity Wraparound annuity |
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