Swiss annuities can vary in the way they are set up. The first major difference is regarding when you will start receiving annuity payments - you can have an immediate annuity, or a deferred annuity.
Immediate annuities
Immediate annuities, sometimes also called retired income annuities, are a great way for senior citizens to maximize their retirement income and avoid inflation-related losses from their country of residence.
Payments not only consist of interest earnings but also include the return of funds within the average remaining life span. You are guaranteed an income for life, which means that the insurance company will continue making payments even after your principal and interest earnings have been consumed. This can be seen in the chart below, where the payments are the blue columns and the value of the policy is red - and of course, although you will continue receiving payments after consuming the principal, the value of your policy will never be lower than zero.
Deferred annuities
You make a deposit to be left with the insurance company for a given number of years - this is referred to as the accumulation period. During this period (marked red in the chart below) your deposit earns annually compounded interest plus dividends.
During the accumulation period you can:
- shorten the accumulation period
- extend the accumulation period up to age 85 of the insured person
- surrender the policy (also possible after the accumulation period)
When you start drawing funds - or annuitizing - you will start consuming the value of your policy. These payments (marked orange in the chart below) are drawn from the premium + earned interest of your policy. Annuitizing is not a new transaction, but a feature of your contract - so there are no additional fees or commissions to be paid.
