See how much income a lump sum can pay over a fixed period at a given interest rate, or how much you need to fund a target payment. The schedule shows payouts, interest earned and the remaining balance each year.
| Year | Payment | Paid this year | Interest earned | Balance at year end |
|---|
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Turn savings into a predictable monthly amount.
Check whether an annuity offer is competitive.
Find the lump sum needed for a target income.
A fixed-term annuity spreads a lump sum, plus the interest it earns, evenly across a set number of payments. Early payments are mostly interest earned on a large balance; later payments are mostly the return of your own principal.
Choosing an increasing payout means lower income at first and more later. Over a long retirement this can better match rising costs.
Annual rate / payments per year.
Years x payments per year.
Ends at zero after the last payment.
For level payments at the end of each period: payment = PV x r / (1 - (1 + r)^-n), where r is the rate per period and n the number of payments. Payments at the start divide this by (1 + r).
An ordinary annuity pays at the end of each period; an annuity due pays at the start. Annuity due payments are slightly smaller because the money earns interest for less time.
Payments stay level within each year and rise by the chosen percentage at the start of each new year, which helps protect income from inflation. The first-year payment is lower to compensate.
No. This is a fixed-term (period certain) calculation. A life annuity pays for as long as you live and is priced by insurers using life expectancy tables.
For an annuity quote, use the rate the contract credits. For a do-it-yourself drawdown, use a conservative expected return.
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