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What is an annuity?

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Quick answer

An annuity is a financial product that pays you a steady stream of income, often for life, usually in retirement. You pay in a lump sum or over time, and in return the provider guarantees regular payments — trading savings for predictable income.

Key things to understand

  1. It provides a steady, often lifelong, income stream.
  2. You fund it with a lump sum or regular payments.
  3. It's commonly used for retirement income.
  4. It trades a pot of savings for predictable payouts.

People also ask

What is an annuity?
A financial product that turns savings into a guaranteed stream of regular income, often for life.
How does an annuity work?
You pay a lump sum or installments to a provider, who then pays you regular income, typically in retirement.
What's the downside of an annuity?
Income can be lower than other investments, and money paid in is often locked away or hard to access.