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Beginners guide- annuity

Annuities: Beginner’s Guide for Kenyans

Beginners Guide- Annuity

Annuities: Beginner’s Guide for Kenyans

An annuity is an agreement between a person and an insurer where the person pays a single premium to the insurer, which is then converted into regular payments for life.

One can buy an annuity plan by paying a one-time premium to an insurance company just before retiring or by making regular premium payments. There are various types of annuities available to Kenyan investors, which are growing into a more and more popular option to provide retirement income in the country. They include:

Types of Annuities in Kenya

  1. Instant Annuities: An immediate annuity is a kind of annuity that starts paying you income as soon as you buy it. This is appropriate for individuals who are nearing retirement or have already retired. The Old Mutual Guaranteed Income Plan, Britam Guaranteed Income Plan, and Jubilee Insurance Guaranteed Annuity Plan are a few of the most well-known immediate annuities in Kenya.
  2. Delayed Annuities: A deferred annuity is a form of annuity that begins paying out income later, such as after a set number of years or when you reach a specified age. They offer benefits such as unlimited contribution, tax-deferred growth of earnings, and a range of benefits such as guaranteed minimum lifetime payout. Deferred annuities like the ICEA Lion Retirement Plus Plan and APA Life Pension Plan are among the most popular in Kenya.
  3. Fixed Annuities: A fixed annuity is like a contract from an insurance company to pay you a set interest rate on the money you put into your account. It’s a way to make sure you have a steady and reliable income in the future. The annuity provides an interest rate that will be guaranteed for a particular duration. The Co-operative Bank Annuity Plan and the Kenindia Assurance Annuity Plan are some of the fixed annuities in Kenya.
  4. Variable Annuities: It is a type of investment contract between an individual and an insurance company. The value of the contract can fluctuate based on the performance of an underlying portfolio of investments chosen by the individual. Nevertheless, variable annuities are not favorable for meeting short-term goals. These annuities let you invest in various mutual funds or other investment vehicles, and the payout is dependent on how well those investments perform. The Liberty Life Gold Annuity Plan and Sanlam Investments Living Annuity are some of the most well-known variable annuities in Kenya.

“Annuities can provide a guaranteed stream of income for life.”

Benefits of Annuities

Guaranteed Income: Annuities provide a long-lasting income stream, which can help ensure a steady source of retirement income.

Tax Benefits: In Kenya, annuities offer tax incentives such as tax-free payouts or reduced tax rates on payouts.

No Market Risk: Even though fixed annuities provide a guaranteed interest rate; you don’t have to worry about market fluctuations or volatility affecting your retirement income.

Succession Planning: Annuities offer estate planning benefits such as the ability to name a beneficiary who will receive the annuity’s remaining value upon your death.

Related Article: Pension Scheme: Do I Need One?

Conclusion

Overall, annuities are an excellent way to supplement retirement income in Kenya. You can find a plan that aligns with your financial goals and provides you with the financial security and peace of mind you require during your retirement years by researching the various types of annuities available.

An annuity is an agreement between a person and an insurer where the person pays a single premium to the insurer, which is then converted into regular payments for life.

One can buy an annuity plan by paying a one-time premium to an insurance company just before retiring or by making regular premium payments. There are various types of annuities available to Kenyan investors, which are growing into a more and more popular option to provide retirement income in the country. They include:

Types of Annuities in Kenya

  1. Instant Annuities: An immediate annuity is a kind of annuity that starts paying you income as soon as you buy it. This is appropriate for individuals who are nearing retirement or have already retired. The Old Mutual Guaranteed Income Plan, Britam Guaranteed Income Plan, and Jubilee Insurance Guaranteed Annuity Plan are a few of the most well-known immediate annuities in Kenya.
  2. Delayed Annuities: A deferred annuity is a form of annuity that begins paying out income later, such as after a set number of years or when you reach a specified age. They offer benefits such as unlimited contribution, tax-deferred growth of earnings, and a range of benefits such as guaranteed minimum lifetime payout. Deferred annuities like the ICEA Lion Retirement Plus Plan and APA Life Pension Plan are among the most popular in Kenya.
  3. Fixed Annuities: A fixed annuity is like a contract from an insurance company to pay you a set interest rate on the money you put into your account. It’s a way to make sure you have a steady and reliable income in the future. The annuity provides an interest rate that will be guaranteed for a particular duration. The Co-operative Bank Annuity Plan and the Kenindia Assurance Annuity Plan are some of the fixed annuities in Kenya.
  4. Variable Annuities: It is a type of investment contract between an individual and an insurance company. The value of the contract can fluctuate based on the performance of an underlying portfolio of investments chosen by the individual. Nevertheless, variable annuities are not favorable for meeting short-term goals. These annuities let you invest in various mutual funds or other investment vehicles, and the payout is dependent on how well those investments perform. The Liberty Life Gold Annuity Plan and Sanlam Investments Living Annuity are some of the most well-known variable annuities in Kenya.

“Annuities can provide a guaranteed stream of income for life.”

Benefits of Annuities

Guaranteed Income: Annuities provide a long-lasting income stream, which can help ensure a steady source of retirement income.

Tax Benefits: In Kenya, annuities offer tax incentives such as tax-free payouts or reduced tax rates on payouts.

No Market Risk: Even though fixed annuities provide a guaranteed interest rate; you don’t have to worry about market fluctuations or volatility affecting your retirement income.

Succession Planning: Annuities offer estate planning benefits such as the ability to name a beneficiary who will receive the annuity’s remaining value upon your death.

Related Article: Pension Scheme: Do I Need One?

Conclusion

Overall, annuities are an excellent way to supplement retirement income in Kenya. You can find a plan that aligns with your financial goals and provides you with the financial security and peace of mind you require during your retirement years by researching the various types of annuities available.

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