The desire to enjoy the fruits of your labour in your golden years is natural. But what happens when those years come, and you find yourself financially unprepared? Achieving financial security goes beyond building a successful career or business.
A successful retirement plan does not overly depend on the goodwill of your children, family, or friends, even if they are financially stable.
The best way to ensure that you continue to enjoy a comfortable lifestyle when you retire, without becoming a burden, is by building financial security now. This is where Annuity comes in.
Annuity guarantees steady income for life
An annuity is a pension plan designed to provide you with a steady, predictable income stream after you stop working. Think of an annuity as a formal agreement between you and an insurance company. You either invest a lump sum of money upfront or make smaller payments over time.
In return, the company guarantees they will send you regular payments, either starting immediately or at a future date you choose. This flexibility allows you to tailor the investment to your financial situation.
The two phases of annuity
Annuity plans function in two distinct phases: the accumulation phase and the payout phase. During your pre-retirement (accumulation) phase, the funds you contribute to your annuity grow within the plan. This growth can potentially help you reach your retirement income goals.
Once you reach retirement age (or a date you selected), the annuity kicks in, and you will start receiving regular payments. The amount you receive depends on how early you start saving. Therefore, early saving is highly recommended.
Insurers understand that financial goals, lifestyle, and risk tolerance vary, so they offer a range of annuity plans to suit individual needs.
Find the perfect fit, explore a variety of options
In choosing an annuity, one size does not fit all. There are five different options to choose from:
- Life Annuity: With a Life Annuity, your insurance company makes regular payments to you for as long as you live. Choose the payout frequency that best suits your needs – monthly, quarterly, or annually.
- Joint Life Annuity: This policy guarantees income for you and your spouse. You will both receive regular payments for as long as either of you is alive. This ensures financial security even after one spouse passes away.
- Life Annuity guaranteed for 5/10/15 years: This plan offers a guaranteed income stream for a fixed period of your choosing (5, 10, or 15 years). If you pass away within that period, your nominee will continue receiving payments until the end of the guaranteed term.
- Immediate Annuity with Regular Payout: You will start receiving income payments right after you invest, and your insurer will continue at your chosen schedule.
Benefits of annuity
- Fixed income for life
- No risk of outliving your savings
- Potential to earn more
- Zero Investment risk
Why annuity should be your preferred pension plan
- Peace of Mind: Unlike market-linked investments, annuities offer low risk and guaranteed returns. Your insurer manages the investment, so you can invest with confidence. The exact amount you will receive is fixed at the time of purchase (be sure to review the terms and conditions).
- Financial Independence for Life: Unlike a lump sum retirement payout that can be depleted quickly, annuities provide a steady, guaranteed income stream throughout your retirement. This ensures you can maintain your desired lifestyle without financial worries.
- Flexibility You Deserve: Annuity plans offer control over your income. Choose how often you receive payment. Additionally, some plans offer flexible premium payment options (monthly, half-yearly, yearly) during the build-up phase, allowing you to tailor the plan to your budget.
Is my money safe with annuity?
Your investments are secure with an annuity. Regulatory bodies like Assets Management Corporation of Nigeria (AMCON) and the National Pension Commission (PenCom) oversee annuity providers, ensuring your financial well-being.
How to earn more on an annuity plan
These bar charts reveal a clear connection between your retirement income and four key factors: investment amount, frequency, retirement age, and starting age. The earlier you begin investing and the more you contribute, the greater your retirement payout will accrue to.
Table 1: The impact of retirement age, investment return, the age one starts saving, and the amount of regular contributions on annuity payout.
Despite the glaring advantages of taking out an annuity, there are some myths casting a shadow on its reliability.
Common misconceptions about annuities cleared up
- The payout does not stop coming when a person dies. Many annuities offer survivor benefits that continue payments to a designated beneficiary after a death.
- Inflation does not outweigh returns. Inflation protection is introduced to help your income keep pace with rising costs.
- The insurance company does not make all the money. Annuity contracts are designed to benefit both you and the insurer. You receive guaranteed income, while the insurer manages the investment risk associated with your longevity.
Do your research before choosing an insurance company. Look for a reputable provider with a strong track record, like Coronation Life Assurance Limited.
Coronation Life Assurance Limited offers a variety of annuity plans, including the Retiree Life Annuity Plan, with flexible payout options. Everyone deserves a secure retirement. Start investing today, no matter the amount.
Watch the full webinar on our YouTube channel: Coronation_NG. For more enquiries on our product offerings, visit our website at www.coronation.ng or email us at info@coronationinsurance.com.ng.
