Fixed annuities, as the name suggests, carry a fixed predetermined rate of interest. Most people who would like to invest, but do not want to invest in risky portfolios; would find a fixed annuities to be favorable to them. Most pension funds, because they are spread over many decades, prompt one to naturally want some sense of certainty; the fixed annuities would be the perfect solution. Let us briefly look into the pros and cons of fixed annuities. Let’s start with the pros.

Pros
The main distinguishing feature of the fixed annuities, and in fact any annuity related to pension funds- is that the payments are exempted from taxation, which is usually given to citizens by governments primarily to encourage them to make savings for their retirement .Unfortunately some rich individuals have identified loopholes in the tax system and have made fictitious payments to these pension funds with the prime goal of tax exemption.

Annuities are certainly a worthwhile investment opportunity that gives one peace of mind because they have an assured source of income without having to work. It would be disastrous if one was to approach old age with no source of income and would have to rely solely on their relatives.

With the fixed annuities, because the rate is fixed, you don’t have to worry and stress yourself out with the complex stock exchange mechanism to try and estimate your income, these are just a few of the advantages. Let us look briefly at the disadvantages of the fixed annuities.

Cons
Given that fixed annuities are initially intended to be spread over a long period of time, it may happen that due to unforeseeable circumstances, signatory to the fixed annuities may be desperate for finances and would want to withdraw the funds to attend to immediate pressing issues. The unfortunate thing is that the insurance firms would charge fairly hefty charges at times, making it almost worthless withdrawing one’s invested funds .Governments would also want to reverse the tax exemption benefits that they initially have and would heavily tax the withdrawal.

Your hard earned money is tied up in an insurance firm with a fixed rate of interest, meaning that if you were to have a better alternative then your options are limited to just the insurance firm, and options of changing from one investment to another are not there.

When you invest in fixed annuities, your purchasing power is diminished because of the market performance. If the market performs very well you would have been better of with the variable annuities which would carry a higher rate of return when the market performs well.

The options of whether to take a fixed annuity is truly speaking down to the individual as there is no definite answer. The quality of any decision that one makes is often influenced by the amount of information that one has at the time because when we are considering annuities that spread over many years and given that many economies go through economic cycles, some moving from fast world countries to third world countries.

It is important that we watch the trends of many insurance companies. though a few have gone under and were unable to meet their financial obligations. This has left pensioners very frustrated after working hard for more than half a century. It must be said that this is not a common situation and should not be used as blanket for not investing in one’s pension funds. There are also rare situations where governments had to quickly intervene and rescue the situation.

One of the reasons why governments have been very keen on pension contribution and pensioners so much; is that statistics show that most voters are in fact pensioners, thus politicians who are looking for votes would want to appear like they are fighting for the betterment of the pensioners, but are indeed after the votes.

If governments were to shoulder the responsibility of taking care of pensioners, it would cause a very big strain on the national budget given that the elderly peoples needs are very costly. Elderly people tend to get sick more often and incur higher medical bills. That is why the fixed annuities play a very important role in our society.

Conclusion  
It is important that we all invest in fixed annuities, and this does not just apply for the sake of retirement, one can take fixed annuities for the loss of income or capital, especially those that are in business.

Many of us want a win-always situation, but the truth is that we would some times win and some times lose, but the losing bit should not be an excuse for not taking the fixed annuities.There are situations where one takes an annuity and ends up dying two months later, in this case it can be said that the person benefited financially because a lot more money would be paid to his next of kin, of course we can not equate life to financial gain. It is also equally important that, especially the youths, are encouraged to sign up for annuities for the sake of their retirement days .The state pension funds are often not enough and one needs a private pension fund to top up their pensions.