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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning

A client has a retirement corpus of Rs 50,00,000 at retirement and will buy an annuity. He compares a single-life annuity with a joint-life annuity with return of purchase price to his nominee. His wife is 8 years younger and has no income. Which statement is most appropriate?

The joint-life annuity typically pays a lower periodic amount but continues income to the surviving wife after the husband's death. A single-life annuity stops on his death, so it suits a client with no dependants better than this case.

  1. AThe joint-life option generally gives a lower periodic payout but continues income to the wife after his deathCorrect
  2. BThe joint-life option gives a higher payout than single-life because two lives are covered
  3. CBoth options give identical payouts irrespective of the age of annuitants
  4. DA single-life annuity continues payments to the wife after his death

Explanation

Joint-life annuities cover two lives and a longer expected payment period, so the periodic payout is lower than single-life. Single-life payments stop at the annuitant's death, so it leaves the dependent wife without income.

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