What Are Annuities?

What is Annuity?

An Annuity is a contract that provides a guaranteed income to the annuitant for life (or a shorter specific period) with income payments made annually, semi-annually quarterly or monthly.

Annuities have sometime been described as the opposite of life insurance because life insurance provides protection against someone dying too soon, annuities provide protection against someone “living too long” - living so long as to outlive one’s financial resources.

Although not strictly a life insurance product, annuities are sold by life insurers in Singapore. One can either use cash or the CPF Minimum Sum to purchase annuities.

Buying Annuity Policy For Retirement

Purchasing annuity policy is a more feasible choice than leaving the money in the bank for most people. The reasons being:

• the person may not have the discipline to not to over draw from the account for reason such as going for tours more often than planned. This will cause the principal to deplete faster.
• Annuity policies are specially designed to protect one against living too long and outliving his resources
• Depending on the type fo annuity purchased, the annuity payment may continue to be paid even though the principal sum (purchase price) used to purchase the policy has been exhausted.

Benefit of Annuities

• Annuity payout is free from income tax
• Provide guranteed income
• Provide option for annuitant to pay the purchase price over his working years
• Investment returns earned during the accumulation period is tax free
• Capital may be guaranteed depending on the types of annuity purchased

Limitation of Annuities

•  Cannot be used for death protection and should be purchased only after provision for pre-mature death is in place
• cannot be used to provide for major illness protection
• Not suitable for people in poor health
• Usually does not have any feature to counter the effect of inflation

If you are looking for an annuity for yourself or your parent, feel free to contact me! Being an independent consultant, I have access to almost all the annuities available in Singapore. Because of that, I have done some comparison on each annuity so as to understand which plan is most suitable for different type of client, and which plan give better returns. Call me direct at 91059260 or email at jack@investmentsg.com

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