single-premium annuity
There are two ways to buy a lifetime income: drip money in over years, or pay all at once. A single-premium annuity is the all-at-once version. You give the insurer one lump sum, and in exchange it owes you income — either starting immediately or after a deferral. It is the natural choice when you already have a pot of money, such as a retirement account you are cashing out or an inheritance.
The defining feature is simply that there is one payment in, not a stream of contributions. That lump sum is converted, using a mortality table and an interest rate, into a guaranteed income. If income starts right away it is a single-premium immediate annuity (SPIA); if it starts later it is a single-premium deferred annuity. For example, rolling a 300,000 retirement account into a SPIA at 66 might produce roughly 1,700 a month for life. The arithmetic is the same equivalence principle used everywhere in actuarial pricing: lump sum = actuarial present value of all future payments.
Single-premium annuities are the standard way pension schemes and retirees 'lock in' a lifelong income, and insurers use them in bulk to take over (buy out) company pension promises. The honest caveat: you are committing the entire lump sum at one moment, so the income you get is fixed by the interest rates and your age on that single day. Buy when long-term interest rates are low and you lock in a lower income for life — many buyers stagger purchases (annuity laddering) to reduce this timing risk.
When Lin retires at 65, her workplace pension is offered as either a 320,000 lump sum or a monthly pension for life. She takes the lump sum and uses 250,000 of it to buy a single-premium immediate annuity giving 1,400 a month, keeping 70,000 liquid for emergencies. She has effectively rebuilt a pension, but on her own terms.
One lump sum in, a lifelong income out — bought all at once on a single day's rates.
'Single-premium' describes how you pay, not when income starts. A single-premium annuity can be immediate or deferred — do not assume one lump sum always means income today.