FinTech Glossary

Meaning

An annuity is a financial product that provides a series of fixed payments made at regular intervals, often used as a retirement income tool or to structure long-term payouts from an insurance or investment contract.

Business Context

In India, annuities are commonly purchased through life insurers and are mandatory for a portion of National Pension System (NPS) corpus withdrawal, providing retirees with a steady income stream.

Types of Annuities

Annuities can be immediate (payouts begin right after a lump sum is invested) or deferred (payouts begin after an accumulation period). They may also be fixed (guaranteed payment amount) or variable (payment linked to investment performance).

Why It Matters

Annuities help individuals and businesses planning employee benefit schemes structure predictable long-term payouts, balancing the need for steady income against liquidity and inflation considerations.