The word “annuity” refers to any payment, usually fixed, payable for a fixed period of time. This period could be in years or for a lifetime, when it is then referred to as a “life annuity”.
Another version of an annuity is where money is invested in the stock market and payments are made out regularly as a fixed percentage or a fixed amount.
As you can imagine annuities and the rates that govern them, differ greatly in various countries such as the UK, US, Canada, Australia, Switzerland etc.
Annuities that a have a finite number of payments are often referred to as term certain annuities or fixed annuities but again these terms can differ in meaning.
The primary use of annuities is to guarantee the payment for the period agreed upon. The purchaser or annuitant does not want to bear the worry of seeing his or her investments lose value in the stock market through mutual funds and equity positions. The crash of 2008 hurt a lot of people who had been in the market, destroying pension incomes and it could be repeated in 2011.
Protection and guarantees are what life annuities provide and that is what life annuitant want as they grow older; a guaranteed income that does not change.