Tuesday, 5 October 2010

Annuity Funds or Pension Plans

An Annuity fund is a fund where an investor can deposit a certain amount of money in an insurance company or any other financial institution to get a number of assured monthly payment for a number of years in future, most probably when the investor retire from his service or for the lifetime of the retiree and a beneficiary. The financial institution or the insurance company invests this money in various financial products such as stocks, Mutual funds, bonds etc.

Most of the annuity fund payments are partly guaranteed according to the risk bearing preference of the investor. So this pooled money would be invested in safe investments.

Another type of annuity fund is the money invested by an employer for giving pension to his employees when they retire from their service. In this case the employer can fix the degree of risk he can bear and according to the development of fund they give out pension to his employees. But if the investment grows adversely he may adjust the pension for a certain period to overcome the loss.

The annuity funds also can be managed by employees associations such as teachers association, nurses association etc. In this case also the poor management of fund may lead to decreased benefit or no any benefit as the case may be.

Annuity funds, if managed well may give out stable payments for a long time to the retiree or the beneficiary for their life time. It is according to the investment strategy of the institution who handles the fund. If there is a well established and planned management, the depositor can earn a good amount of money. Unless there will be a loss. So choose the financial institution wisely after studying their past performance, even if it says that the past performance is not a yardstick for the future stability.

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  1. [...] (15th LOK SABHA) on 1st and 7th Reports reiterated that the Government … Continue reading ? Annuity Funds or Pension Plans An Annuity fund is a fund where an investor can deposit a certain amount of money in an insurance [...]

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