Glossary · Rates & Instruments
Annuity
A contract that guarantees a series of regular payments to an individual in exchange for a lump sum investment, typically used for retirement income purposes.
01—What is Annuity?
The definition — and what it means in practice.
An annuity is a contract that guarantees a series of regular payments to an individual in exchange for a lump sum investment. The payments can start immediately or at a future date, and are usually set out as a fixed amount or a defined schedule. Annuities are commonly designed to turn a pool of savings into predictable income, often linked to retirement planning.
For an investor, the key appeal of an annuity is certainty of cash flows: it is built to provide income you can budget around. The trade-off is flexibility and liquidity, because your lump sum is converted into a payment stream rather than remaining available to trade or reinvest. Comparing an annuity with market investments also means separating “income stability” from “investment returns”, since the contract’s guarantee is central to how it behaves.
You pay Rs 100,000 upfront, and the annuity contract pays you a fixed amount each month for an agreed period, like a salary.
- An annuity converts a lump sum into guaranteed regular payments.
- It is typically used to plan predictable retirement-style income.
- Guarantee and payment terms depend on the contract, not on market prices.
- Main trade-offs are reduced liquidity and less flexibility than holding tradable assets.
02—How annuity works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the Pakistan Stock Exchange (PSX), most retail investing is done through tradable securities such as shares and funds, where prices can move daily and outcomes are not guaranteed. An annuity is different: it is a contract promising a defined stream of payments, so it is not analysed in the same way as a listed share’s dividend or price performance.
A PSX investor may still think about annuities when doing asset allocation, because they serve a different role from equities. Shares held electronically through the Central Depository Company (CDC) can be bought and sold on the exchange and settle on T+1 through NCCPL. Annuity payments, by contrast, come from the contract terms rather than exchange trading, so the focus is on cash-flow needs and liquidity planning.
03—Common misconceptions
Where investors most often get this wrong.
An annuity is just like a dividend-paying PSX stock.
Dividends are declared by companies and can change; an annuity’s payments are set by contract and are designed to be predictable rather than market-driven.
An annuity always gives higher returns than the stock market.
An annuity is primarily an income-guarantee product. Its value is stability of payments, not necessarily maximising returns versus equities.
Once you buy an annuity, you can freely take your money back anytime.
Annuities typically convert a lump sum into a payment stream. Accessing the principal may be limited by the contract’s terms and liquidity features.
04—Using annuity on BSL
Where this term shows up across the platform — with live data.
- Compare market-based income alternatives using Highest Dividend Yield.
- Track how broad market benchmarks behave using the KSE-100 Index.
- Review tradable instruments available on the platform via Stocks.
- Build and screen a portfolio shortlist on the Stock Screener.
05—Frequently asked questions
What investors ask about annuity on the PSX.
Frequently Asked Questions
An annuity is a contract where you pay a lump sum and receive guaranteed regular payments according to agreed terms. It is often used to create predictable income, such as for retirement-style budgeting.
An annuity is a contract rather than a listed share, so it is not typically traded like PSX equities. PSX trading involves securities bought and sold through brokers, with prices set in the market.
Dividends are payments a listed company may declare and can vary with profits and policy. An annuity’s payments are defined in a contract and are meant to be predictable, independent of daily stock prices.
An annuity’s payment stream is set by contract, so it does not move up and down with PSX prices. That said, it is a different product category from tradable equities and should be compared based on cash-flow needs and liquidity.
Yes. Asset allocation is about mixing tools with different roles. An annuity is usually considered for predictable income, while equities and funds are typically used for growth and market-linked returns.
06—Related terms
Keep building the picture.
Securities that pay a fixed return over a defined period, such as bonds or government securities. Generally considered lower risk than equities.
A fixed-income instrument representing a loan made by an investor to a borrower, typically a government or corporation. The borrower pays periodic interest and repays the principal at maturity.
A portion of a company's profits distributed to shareholders. Can be in the form of cash, bonus shares, or a combination of both.
The process of distributing investments across different asset classes, such as equities, fixed income, cash, and commodities, to balance risk and return based on an investor's goals and risk tolerance.
A pooled investment vehicle managed by a professional fund manager. Investors buy units in the fund, which then invests in a diversified portfolio of securities. In Pakistan, mutual funds are regulated by the SECP and distributed through asset management companies.
The income generated by an investment over a period, expressed as a percentage of the investment's cost or current market value. Dividend yield and bond yield are the most commonly referenced forms.
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