What is an Annuity?
An annuity is a long-term financial agreement between an individual and an insurance company, designed to provide a consistent income stream after retirement. It helps secure a stable financial future and can be purchased independently or through an employer.
Types of Annuities:
- Immediate Annuity: The individual makes a lump-sum payment or smaller contributions, and the insurance company starts disbursing payments almost immediately or within a short time frame.
- Deferred Annuity: Payments begin at a specified future date. Deferred annuities offer flexible timelines, allowing individuals to select plans that start payments 15 or 25 years later, continuing for their lifetime.
- Qualified Employee Annuity: Employees may access annuities through their employer’s qualified annuity programs, where the employer provides specific annuity benefits as part of their plan.
How HR teams use this term
HR teams usually use Annuity when they write policies, explain employee communication, review payroll or leave records, or keep employee data clean in an HRMS.
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