Published on March 9, 2014
AN INTRO TO LIFE ANNUITY An introduction Guide to Life Annuity and How to Guarantee Your Income For Life ADEWALE FAYINKA A Publication of
TABLE OF CONTENTS Cover Page 1 Table of Contents 2 Introduction 3-4 Immediate Annuity 5 Deferred Annuity 6 Benefits of Annuity 7 If you fail … 8 The Life for You 9 Avoid This 10 Getting Started 11 F2A Resources f t 2 in
INTRODUCTION Popular research have shown that all men and women, at one time or the other, have had need to think or agitate their minds on one or all of the following: The possibility of living without an end. Comfortable lifestyle and living standards after retirement. Being able to guarantee such high standard while they are yet young. However, Science is yet to provide an answer to the first proposition, while the second and third proposition has been achieved only through prior planning.
LIFE ANNUITY GUARANTEED LIFE INCOME WHILE YOU CAN Life Annuity is defined as a program for a series of regular pay-outs made to Annuity holders or Annuitants by an insurance company, for the entire duration of their life after retirement, or to their nominated dependants in the event of earlier death* It is backed by law (PRA, 2004), and extremely flexible. A candidate for an annuity program has the power to determine the following: When Annuity pay-out commence. How often Annuity pay-outs are made. How much Annuity payment is paid to each individual. Annuity pay-outs are usually automated, and paid directly into Annuity holders’ accounts on pre-determined dates – monthly, quarterly or annually. * Provided that the annuity plan is within the guaranteed window period. Guaranteed window period refers to the number of years annuity pay-outs are guaranteed after the demise of the annuity holder. Payments are guaranteed completely during the lifetime of the annuity holder. F2A Resources f t 4 in
TYPES OF ANNUITY There are different types of annuity programs, but this write-up will be basically concerned about two types: Immediate Annuity and Deferred Annuity. IMMEDIATE ANNUITY This refers to the type of Annuity program where regular pay-outs commence immediately after issuance of the annuity contract. Annuity pay-outs are made throughout the lifetime of the annuity holder, or payable to dependants in the event of earlier death*. WORKED EXAMPLES A man aged 60 years has just retired. His pension/gratuity payments totaled N20 million. If he chooses to invest the whole sum into Immediate Annuity, his pay-outs will be as follow. FREQUENCY OF ANNUITY PAY-OUTS ANNUITY PAY-OUTS ANNUALLY 2,432,460.00 SEMI-ANNUALLY 1,216,230.00 QUARTERLY 608,115.00 MONTHLY 202,705.00 In line with the PRA (2004), immediate annuity is guaranteed for 10 years, and for Life thereafter. F2A Resources f t 5 in
DEFERRED ANNUITY Deferred Annuity refers to an annuity program whereby the annuity payouts are deferred until the annuity holder attains his pre-determined retirement age. The purchase money (also called premium) can be made through regular small payments, either monthly, quarterly or annually. The 6 payment stops once the annuity holder attains his retirement age. This type of annuity is ideal for young and middle aged people in employment and in self-employments. WORKED EXAMPLE 2 A man aged 35 years desired to retire at Age 55. His annual salary is N4m, but wishes to retire on a guaranteed life income of not less than 50% of his present annual salary (N2m). To buy Annuity for life, his contributions presently is either of the following (monthly, quarterly or annually). PREMIUM PAYMENT TYPE PREMIUM (OPTION 1) PREMIUM (OPTION 2) NO GUARANTEE 5 YEARS GUARANTEE CURRENCY N N Single Premium 6,483,300.00 6,628,800.00 Annual Premium 385,400.00 401,400.00 Half-Yearly 197,517.50 205,717.50 Quarterly 100,204.00 104,364.00 33,722.50 35,122.50 Monthly F2A Resources
BENEFITS OF LIFE ANNUITY 7 Guaranteed Life-long income for annuity holders. Flexible program – annuity holders determine the amount, frequency, and the retirement age. Protected and prescribed by Law (Pension Reforms Act, 2004). Purchase sum is invested in long-term high yield instruments. Investors are insulated from the ups and downs of the investment markets. Outstanding balance in the Annuity Holders’ accounts payable to nominated dependants* in the event of earlier demise. A large boost to living a longer and richer life. OTHER TYPES OF ANNUITY Annuity Certain Temporary Annuity Dependents’ Annuity WHO SHOULD BUY ANNUITY? All retirees or retiring persons Entrepreneurs and self-employed persons Those seeking to determine their level of income after retirement Those who wish to guarantee adequate income throughout their lifetime. F2A Resources
SO WHAT IF YOU FAIL TO PLAN YOUR INCOME THROUGHOUT LIFE … WILL YOUR RETIREMENT PLAN LOOK LIKE THIS? F2A Resources f t in
ASSUMING THIS LOOKS LIKE THE LIFE FOR YOU AFTER RETIREMENT? 9 TAKE OUT YOUR ANNUITY PLAN TODAY! Guaranteed Life-long income for annuity holders. Flexible program – annuity holders determine the amount, frequency, and the retirement age. Protected and prescribed by Law (Pension Reforms Act, 2004). Purchase sum is invested in long-term high yield instruments. Investors are insulated from the ups and downs of the investment markets. Outstanding balance in the Annuity Holders’ accounts payable to nominated dependants* in the event of earlier demise. A large boost to living a longer and richer life. F2A Resources
Avoid This! 10 “ When I had the money, I didn’t have the time. Now, I have all the time in the world, and I don’t have the money.” Robert G. Allen illustrating a point in “Nothing Down for the 2000s F2A Resources
GETTING STARTED Here at F2A, we advise our clients on the right type of Annuity Plan suitable for them, help in the choice of an Insurance company that has their best interests at heart, and stay with them through it all to ensure that they enjoy the best Annuity deal ever! FOR A FREE NO-OBLIGATION CONSULTATION Adewale Fayinka on +234 803 7126699; +234 909 3625979 or send an Email to firstname.lastname@example.org A Publication of
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