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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products

Mr. Iyer, aged 40, plans to buy a deferred annuity that pays out from age 60. Which feature best describes a deferred annuity?

A deferred annuity has an accumulation period during which premiums are paid or a sum grows, and income payments start at a later chosen date, such as retirement. This differs from an immediate annuity, where payments start right after the purchase.

  1. APayments begin immediately after a lump sum purchase
  2. BPremiums are paid during an accumulation phase and income payments begin at a later chosen dateCorrect
  3. CPayments are made only to the nominee after death
  4. DThe principal is returned only at maturity with no periodic income

Explanation

A deferred annuity has an accumulation phase, in which contributions or a lump sum build up, followed by a payout phase starting at a future date. An immediate annuity starts payments right after purchase, which is the first option's description.

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