Lump sum annuity is a debatable topic. Many companies have pension plans where they offer annuity which is evenly spread over the life span of its employee. In this, employee gets an assured amount of annuity each month. However, there are many companies which also offer a one time total annuity to their employees. These both methods come with their usual advantages as well as disadvantages.
Lump sum annuity:
Here the employer pays in one installment the entire claim of the pension of the employee. This amount is a large one. Now this entire amount is at employee’s disposal. At this point the intelligence of employee in suitably making use of this amount counts.
If he is successful in managing the annuity in an efficient way, he will be able to generate an equal amount as annuity as his monthly annuity plan would have given him. There are hundreds of able retired employees who had opted for lump sum annuity and are now doing exceedingly well because they were successful in managing their investments. These assets ultimately pass on to their heirs.
The problems come into play when management of funds is not done properly and then the person is left with nothing for his decent living. It is therefore necessary for a pensioner to take a cautious view of different investments plans which are offered by the investing companies. Here it is advisable than he should take an opinion of an able and experienced investment planner.
Annuity pension plan:
In this pension plan, a monthly amount is offered to the investor. Here the investor gets a predetermined and fixed amount of money each month or at some identified intervals. This is a guaranteed amount which a pensioner will get during his entire life.
Some insurance firms even offer many additional facilities like coverage of insurance for spouse against accidents and ailments. Hence here the not investor but this investing company worries about his investment plan.
The main disadvantage of this pension plan is that as time goes by, the monthly amount may become irrelevant due to the inflation rate. In long run, these returns may not help the pensioner. Moreover if the investment company invests unwisely in its endeavors then it the pensioner who will suffer in the end. Many such incidents have taken place earlier too.
So, in this the wisdom of pensioner is supreme and it prevails. The pensioners are advised to take a expert opinion in this matter.
