Annuity, annual allowance, payment, or income derived from funds especially designated for the purpose. Annuities may also be any payments made at fixed intervals. An annuity often represents only the interest derived from a principal fund, but it may also include periodic payments of principal.
In many cases the fund is established pursuant to the provisions of a will or a trust agreement. Annuities frequently are funded by the earnings of life insurance policies. Recipients may be paid from the proceeds of funds that were established for their benefit on the deaths of other life insurance policyholders, or they may have policies of their own. As the importance of “personal pensions” (as opposed to those provided by employers) has increased in many countries, such as Great Britain, so has the importance of annuities. It is usually a requirement that the majority of an accumulated personal pension fund is used to buy an annuity, thus guaranteeing an income for the remainder of the beneficiaries’ lives.