A specific amount of money that has to be paid by an agency or an organization to an individual ‘annuity’ or policy holder over a certain period of time is called as ‘annuity’. The amount which is paid cannot be alternative and remains fix, according to the rate at which the organization must pay the individual. A number of agencies that are employed in this sort of a thing include post offices (Monthly installment scheme’s), Insurance agencies etc.
The amount that is acquired by these agencies is basically put into a specific project or invested in a number of non-movable government ‘bonds’. There are two different kinds of annuity rates – Overdue fixed annuity and overdue variable annuity.
In case of the former, the annuity holder is assured of a money back scheme throughout the period of his life regardless of any criteria. However, the latter is more risky and may not pay back effectively. There is a catch though. Although variable annuities are not safe to indulge into due to the nonexistent assurity of payback, the extra amount earned through them is of non-taxable nature.
Although there is a fixed annuity rate which guarantees a fixed amount of money back to the annuity holder, the rates may be flexible depending upon individual agencies.
