compulsory purchase annuity

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An annuity that must be purchased with the fund built up from certain types of pension arrangements. When retirement age is reached, a person who has been paying premiums into this type of pension fund is obliged to use the fund to purchase an annuity to provide an income for the rest of his or her life. The fund may not be used in any other way (except for a small portion, which may be taken in cash).

Subjects: Financial Institutions and Services.

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