Annuities
Annuities are a form of insurance investment product that allow you to buy a guaranteed income. You pay for this income by purchasing an annuity with a lump sum - this will then pay out a specified income every year for the rest of your life.
Nowadays annuities are most often used by pensions companies. These types of annuities are known as compulsory purchase or pension annuities and often make up the financial pay back elements of many pensions. So, here, when you reach pensionable age some of the pension that you have amassed over the years will be used to buy an annuity that gives you an income (i.e. your annual pension) for as long as you then live. In most cases an annuity purchase of some sort is compulsory with many pensions.
Some people, however, will opt to buy voluntary purchase or purchased life annuities simply because they think that this is a good way to invest their cash to produce a secure income. In both cases, however, an annuity will usually stop making payments when you die unless you take out a specialist product such as an annuity with a fixed payment period or a joint annuity with another person who survives you.