Definition
Annuity Certain
An annuity certain pays a fixed income for a guaranteed number of years regardless of whether the annuitant survives the full period.
Unlike a life annuity that pays for as long as the annuitant lives, an annuity certain guarantees payments for a set term (say 10, 15 or 20 years); if the annuitant dies within the term, the remaining instalments go to the nominee. Some plans combine 'certain and life' features, paying for a guaranteed period and then for life.
This structure suits those who want to ensure a minimum return of value to heirs even if death occurs early in retirement. The payout rate is generally lower than a pure life annuity that buys the highest income but leaves nothing on early death.
Related terms
- Immediate AnnuityAn immediate annuity is a pension product where the buyer pays a lump sum and starts receiving regular income almost immediately, typically from the next payout cycle.
- Deferred AnnuityA deferred annuity is a pension product where the buyer pays premiums (lump sum or instalments) now and the regular income begins after a chosen deferment period.
- Return of Purchase PriceReturn of Purchase Price (ROP) is an annuity option where the original lump sum used to buy the annuity is returned to the nominee on the annuitant's death.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.