Government Incentives
Because of cross-subsidy and the guarantees an annuity can give against running out of income and becoming dependent on state welfare in old age, annuities often have a favourable tax treatment, which may affect how attractive they are relative to other investments.
Immediate annuities are a compulsory feature of certain pension saving schemes in some countries, where the government grants tax deductions, provided that savings are paid into a fund which can only (or mainly) be withdrawn as an annuity. The Netherlands has such schemes and United Kingdom used to until A day. From 2003 the tax deduction in the Netherlands is only allowed if, without additional savings, the old age income would be less than 70% of the current income. The French government currently honors a very unusual debt contract: an annuity that was issued in 1738 and currently yields 1.20 euros per year.
Read more about this topic: Annuity (European Financial Arrangements)
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