Annuity Can Help Alleviate Poverty

By Oyekola Taiwo Zacharia  email address: consciousofrisks@yahoo.com; phone no: 07063718460

Has it ever occurred to you that annuity can help alleviate poverty? Well, that is the reality which this week’s column is set out to prove, especially against our background of challenging economy and widespread poverty.

Poverty in old age is complex and often driven by intersecting factors such as economic

inequality, increased life expectancy, the high cost of ageing, and rising healthcare expenses.

Running out of money early in retirement is a serious risk because, at that stage of life, gaining employment is difficult, risk appetite is low, and a steady income is essential for survival.

Retirement is meant to be the period when individuals begin to receive returns from their lifelong investments, savings, and business activities.

However, poor investment decisions, unfavourable government policies, and economic uncertainties have led many retirees into cash-flow difficulties at old age – not necessarily because they failed to plan, but because their plans could not withstand financial shocks.

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The diminishing purchasing power caused by inflation has also prevented many retirees from maintaining their standard of living or meeting basic needs, thereby reducing their quality of life.

In spite of this, a life annuity is designed to address key challenges that have prevented retirees from receiving guaranteed and consistent income.

1) Guaranteed Lifetime Income:

An annuity provides a safety net for self-employed individuals, informal sector workers, and retirees by pooling funds and ensuring they do not run out of money. This risk is effectively eliminated under this plan.

2) Inflation Protection Option:

Inflation typically diminishes the purchasing power of retirees. Studies show that retirees with guaranteed income feel more confident spending on necessities, which leads to a higher quality of life.

3) Provides a Risk-Averse Mechanism:

In addition to regulatory backing, risks are shared with reinsurance companies to cover uncertainties that may arise in the future.

4) Annuity is Passive Income:

There is an option in a personal annuity that pays five times the annual payment to the nominated beneficiaries when the retiree passes on.

This means an annuity guarantees income for the living and also makes provision for loved ones or spouses.

5) Annuity Operates Based on the Agreement Letter:

It guarantees peace of mind because everything concerning payouts, premiums, and beneficiaries is documented from the outset between the annuity company and the retiree.

Anything that happens thereafter is binding according to the signed agreement letter.

Types of Annuity

1.) Immediate Annuity

This personal annuity provides income right away. It is ideal for those who have just

retired or for self-employed individuals who need immediate cash flow.

2.) Deferred Income Annuity

This type allows the accumulation of funds toward a specific age (50, 55, 60, or 65), with

payments starting later in life. Premiums paid during the accumulation period may be

tax-exempt, depending on applicable regulations. It usually offers higher payouts later

in life when healthcare costs may increase.

3.) Lifetime Annuity with Joint Spouse

This plan ensures that if one spouse passes away, the other continues to receive income,

protecting the surviving spouse from financial hardship.

 –For further clarifications or questions, contact the number above