Life Annuity
A series lifetime payments paid to you, the annuitant, usually when you reach retirement age, until you pass away, and such payments may continue for the surviving spouse or dependants. The annuity is normally paid monthly, quarterly, half-yearly or annually. The amount of annuity may stay level throughout the annuity term or may have automatic annual escalation – either a fixed rate or a variable rate.
The value of annuity depends on the size of the accumulated pension and the annuity rate, being the factor used to convert the accumulated fund into an annuity.
Annuity rates are calculated by actuaries using various factors – mortality, interest rate, age gender and sometimes health. In general terms, the older a person is, the higher the annuity rate because future life expectancy is less, and vise versa. Men, impaired lives or even those in extremely hazardous occupations may get higher annuity rates due to their relative lower-life expectancy.
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