Sometimes, we ever hear the people talk about annuities. But, do you know more about it? Annuities, as an investment option, are often seen as restrictive, unexciting and dull. Annuities is any terminating stream of fixed payments over a specified period of time. This usage is most commonly seen in academic discussions of finance, usually in connection with the valuation of the stream of payments, taking into account time value of money concepts. You pay money in, sometimes over many years, and eventually you get paid an income from that money. This is the traditional view of a retirement annuity: it’s the way grandpa saved up enough to keep the wolf from the door after he stopped working.

But there are other uses for an annuity that can make it a versatile financial choice in certain circumstances. So what are annuities and how are they used? Annuities don’t have to be paid in month by month, like grandpa did. They can be paid in as one large lump sum. And then, sooner or later, they can be paid out again as an income. Why would anyone want to do that?

One of the ways lump sum annuities can be used is in the case of high-earning sportspeople or showbiz celebrities. Suppose you are major league footballer and you earn megabucks every week for a few years while you are in your prime. Sure, you want the mansions and fast cars and jet-set lifestyle. But if you’re smart, you’ll put some of that money away in an annuity so that when your high-rolling days are over you don’t have to sweep the floor at Wal-Mart. All of your transaction will be depend on your annuity rates. Just learn more about that. Don’t forget to calculate your annuity rates before do something related your annuities.

One of the important annuities is the pension annuity. If you wanted some of the pension to go to a partner when you die, then you should include this in the pension contract, however the amount of initial pension you get will go down. It is also possible to include a pension for dependent children. As listed in your annuity rates, the equivalent annuity with a 50% partner’s pension might have a reduced initial income of say £8,000, but, £4,000 will be paid to your partner when you die. If your partner were to die first then the pension will die with you.

You may also add a guarantee to your pension to ensure that the pension will pay an income for a predetermined period of time. This ensures that in the event of the annuitant’s death a specific level of income will be paid to their dependants or estate. The most common guarantee periods are: 5 and 10 years. Adding the guarantee will reduce the initial income received.

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