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Immediate annuity

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The immediate annuity: What's behind it?

An immediate annuity differs from traditional pension products because no savings phase is required to build up the capital. Regardless of the capital amount, the annuity is paid for life. If you are already retired and want to fully enjoy your well-deserved retirement, an immediate annuity or lifetime annuity can be a way to supplement your state pension and receive regular financial support.

A market analysis tailored to your individual needs

When it comes to immediate annuities, we place particular emphasis on the following points:

  1. Security: With an immediate annuity, security is paramount. The minimum pension is guaranteed for life, even if it's not particularly high. If security is more important to you than high returns, you should consider an immediate annuity.

  2. Potential for surpluses: Another aspect we consider is the opportunity to participate in profits. Insurance companies generate returns on your money, from which you can benefit. However, it's important to remember that profits can be rather small in times of low interest rates.

  3. Flexibility: An immediate annuity offers the advantage that you don't have to actively manage your investments in retirement. However, this also means that you have limitations in terms of flexibility. If you're looking for an investment that offers you more flexibility and freedom of choice, another option might be a better fit.

  4. Cost: The cost of an immediate annuity ranges from medium to high. We make sure you receive an offer that meets both your needs and your budget.

  5. Taxes during the payout phase: With an immediate annuity, only the income portion of your pension is taxed. The amount of tax depends on your age when your pension begins. For example, if your pension starts at age 65, 18 percent of the pension is taxable.

  6. Capital election option: We carefully check whether a provider offers you the option of a lump-sum payment. However, please note that a lump-sum payment may involve losses. It is important to weigh the pros and cons to make the best decision for you.

  7. Survivor protection: We take your individual needs regarding survivor benefits into account. With an immediate annuity, you have the option of agreeing on a time-limited annuity guarantee or a return of capital or contributions. However, please note that this may affect your retirement pension.

When advising you on immediate annuities, we consider these aspects in detail and offer you sound decision-making support.

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Your contact persons

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Philipp Badent
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Jannis Klemm

Your contact persons

Man in a black turtleneck stands against a glass-walled office with frosted horizontal stripes.
Philipp Badent
Man wearing a navy polo shirt stands in a bright office with frosted glass panels behind him.
Jannis Klemm

Subject areas

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Retirement provision

Subject areas

Person holding a white piggy bank next to blue family icons, symbolizing family savings or insurance.
Retirement provision

When does it make sense to take out an immediate annuity?

If you have sufficient capital to finance an immediate annuity at the time of retirement, this can be a good way to secure your long-term financial future. It is advisable to consider an immediate annuity if:

  • You have a significant amount of saved money, whether through an inheritance, the sale of a property, or other savings.
  • You are healthy and are expected to have a high life expectancy.
  • Your statutory pension alone is not enough and you need a permanent supplementary pension.
  • You don't feel like regularly withdrawing money from your savings and taking care of managing it.

It's important to note that in the current low-interest-rate environment, your savings will only earn minimal interest. Therefore, an immediate annuity is only worthwhile if you have a longer life expectancy. Also, keep in mind that an immediate annuity is primarily recommended for your own financial security. However, if you want to provide for your spouse or children (for example, through a guaranteed annuity period), you may have to accept a lower monthly payment. If you plan to leave part of your assets to your heirs, it's advisable to set aside this money separately from the outset. Alternatively, you could consider asset management or investments.

Our consultants will be happy to assist you in selecting the right product for you.
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Frequently Asked Questions (FAQ)

With an immediate annuity, you have the option of receiving a lifelong monthly payment through a single payment into a pension insurance policy. The minimum pension amount guaranteed at the start of the annuity payments is known, and the primary feature is security.

The amount of the pension can vary depending on the provider. In our test, the guaranteed minimum pension for a deposit of €100,000 ranged from €258 to €284. If the insurer invests the money successfully, the pension amount can increase through profit sharing.

There are various payout options for an immediate annuity. One option is the fully dynamic annuity, where the annuity amount reached is guaranteed at least. However, with a constant or partially dynamic annuity, there is a possibility that the annuity will decrease if the profit participation declines.
Insurers do not offer a capital option.
With an immediate annuity, it's possible to agree on a guaranteed annuity period to financially protect the partner. This ensures that the annuity continues to be paid for a specific period even after the insured's death. If no guaranteed annuity period is agreed upon, the retirement annuity may be higher.

The cost of an immediate annuity can range from medium to high, depending on the offer. When selecting an offer, we prioritize ensuring that the costs align with our clients' individual needs and budgets.

With an immediate annuity, only the income portion of the annuity is taxed. The tax burden depends on the age at which the annuity begins. For example, if the annuity starts at age 65, 18 percent of the annuity amount is subject to tax.

The amount of an immediate annuity can increase if the insurer generates good returns on the customer's capital. The general market environment and the insurer's investment skills influence the annuity's performance.

A payout plan using equity ETFs can be an alternative to an immediate annuity. This gives you more flexibility and the potential for higher returns. However, it also involves a certain degree of risk.

It is of great importance that customers who take out an immediate annuity have a sufficiently high life expectancy. Only then can they receive more pension payments over the years than they originally paid in.

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