Despite criticism of annuities due to the low-interest environment, the products remain appealing because they provide a guaranteed income for life and will not fall in value.
Mr. Belluscio said school boards commonly give their superintendents annuities and dues for professional societies.
Moreover, insurance companies do not sell actuarially-fair life annuities, in part due to aggregate longevity risk.
Once you begin receiving payments from the annuity, income taxes are due only on the actual amounts you receive.
All that may knock 20% off the value of the pensioner's pot, estimates Chris Noon of Hymans Robertson, an actuarial consultant.The unpopularity of annuities is in part due to the perception that they offer low returns.
"This was not all down to unisex annuity rates, it was partly due to an excess of demand over supply so companies cut rates to reduce business flow and increase margins," he says.
Until now the law backed the City by forcing people to take out annuities that have been shamelessly bad value due to sky-high but opaque charges.
This is partly due to widespread misunderstanding about the annuity as a financial instrument, according to David Certner, the federal affairs director for AARP.
Annuity payments have been weak in recent years due to record low interest rates, which have held down the retirement incomes that most people received in return for their savings.
Not only will your fund have fallen in value a little, but annuity rates are also near all-time lows, due in part to falling gilt yields as investors buy into the UK government bond's AAA rating.
