NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products
Which of the following is a key characteristic of a deferred annuity as compared with an immediate annuity?
A deferred annuity starts paying income only after an accumulation or deferment period, whereas an immediate annuity begins paying soon after the purchase price is paid. Deferred plans may allow instalment premiums and lifelong payouts.
- AAnnuity payments begin after a specified accumulation period rather than right after purchaseCorrect
- BAnnuity payments begin immediately after a single premium is paid
- CPayments are made only for a fixed term and never for life
- DThe purchaser cannot pay premiums in instalments
Explanation
A deferred annuity has an accumulation (deferment) phase during which premiums are paid or a lump sum grows, and payouts begin later. An immediate annuity starts payments soon after purchase with a lump sum. Deferred annuities may be paid for life and can have instalment premiums.
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