Ch 3: LIP 3

Question 1

Consumer needs met by immediate annuity contracts

Answer 1

• Converts capital into lifetime income, removes uncertainty of how quickly capital should be spent to provide income over consumer’s remaining lifetime.
• Protects level of future income and hence standard of living from the risk of living too long.
• Legislation may require that an annuity must be purchased from part or all of pension fund accumulated to the retirement date.