What is the connection between pensions and annuity?
Annuity is life insurance contracts that provide the owner of the contract or an enuitant of a living benefit. Pension plans traditionally take the form of annuit; This has led many people to use the terms pension and annuity interchangeably. At the end of the 20th century, many pension operators ceased to use an annuity -based pension plans and moved funds to cheaper mutual funds or investment plans of shares. Annuity plans provide for solid monthly income payments to participants, while shares based plans have no guarantee.
both pensions and annuity are designed to generate income for pensioners. Insurance companies sell annuits that are often contained in pension, and the annuity that individuals can buy as separate products. The insurance company finances the annuity to charge the bonus fees. Buyers or annuitants receive a return on the bonus and interest in a number of roughly the same payments that are structured to endure for Annuitant's.
Insurance providers use insured --matematic tables to predict the average life expectancy of buyers. Annuity issuers would go bankrupt if the payments received by the annuitants exceeded the premiums that the buyers of the annuity paid for the purchase of contracts. In order to reduce the chances of loss, insurance companies sell the same annuity products to a large number of people and establish monthly income payments on the insurance --matematic tables. The more annuity the company sells, the less likely it is that a high percentage of contractual buyers will live longer than expected, and put the insurance company in financial danger. From the point of view of the issuer's annuity, the annuity contracts are profitable if the Rouns die earlier than expected, because the issuer pays less than expected in terms of live benefits.
Many insurance companies actively launch an annual products to pension providers because PenzijnIt plans to sell annuity to the plans to decrease the risk of loss. Employers and other pension plans are sometimes attracted by annuity because the potential benefits of income are greater than costly. In addition, some workers are more inclined to work for companies that offer lifelong benefits in the form of pensions and anuit than companies offering pension plans without guarantees.
In terms of employees or insurer, pensions and annuity are an attractive combination. On the contrary, from the employer's point of view, the annuity is expensive to finance due to the large premium and ongoing administrative costs. Many employers prefer sponsoring plans based on mutual funds, as the employee is covered by the employee rather than the employer. While the plans of mutual funds do not include any guarantees, there are also no income limits, so Could employees potentially earn knowCe than with traditional pensions and annuity.