What is the term that describes a financial product where an investor makes fixed regular payments during X years, and in return receives a big lump sum at the end of those X years?

  • This is opposite to an annuity. In an annuity, the investor puts up a lump sum (or periodic payments during the accumulation phase), and receives small regular payments thereafter.

  • This is similar to life insurance, except that the receipt of the lump sum is not tied to death.

  • Defined benefit pension is similar to what you describe
    – quid
    Aug 7, 2021 at 3:48
  • something-something insurance? Aug 7, 2021 at 3:49
  • what would be the goal in this case? you could just make payments into a savings/investment account and withdraw it all as a lump sum after x years
    – 0xFEE1DEAD
    Aug 7, 2021 at 3:50
  • @aaaaasaysreinstateMonica whole life insurance?
    – 0xFEE1DEAD
    Aug 7, 2021 at 3:51
  • @0xFEE1DEAD The lump sum should be greater than would be possible in a savings account. The lump sum should also be "guaranteed" (fixed amount to be received on a fixed date), unlike an equity investment account.
    – Flux
    Aug 7, 2021 at 3:57

2 Answers 2


You're describing a deferred annuity

Deferred annuities provide guaranteed income in the form of a lump sum or monthly income payments on a date in the future. You pay a lump sum or monthly premiums to the insurer, who will then invest them into the growth type you agreed on – fixed, variable or index

If you pay the insurance company a lump sum and get regular payments in return, as you describe in the question, that's an immediate annuity. If you pay the insurance company a series of monthly payments and get a lump sum at the end, that's a deferred annuity.

Be aware that deferred annuities aren't great investment options for the vast majority of people. If you aren't, for example, maxing out your retirement plan contributions, you would definitely not want to invest in a deferred annuity. The insurance companies are going to layer on a bunch of fees particularly if you want the ability to get some of the market's upside potential while also having a guaranteed minimum accumulation benefit (GMAB) in the event the market goes down. The insurance salesman that will pitch annuities to you will make a pretty fat commission on the deal because the insurance company expects to make a substantial profit on the deal.

  • What is the difference between a deferred annuity and an endowment policy?
    – Flux
    Aug 7, 2021 at 9:02
  • Essentially, a deferred annuity is nothing more than a Christmas Club account (sinking fund) with a slightly higher interest rate.
    – RonJohn
    Aug 7, 2021 at 13:05

Two possibilities:

In small scale personal finance we have a Christmas Club. The participant makes regular payments throughout the year, and gets the accumulated balance in time for shopping. Today, credit cards allow one to reverse the order of spending and saving...

In larger scale business financing, we have the sinking fund. A business realizes that, say, its fleet of delivery vans will need to be replaced in five years. So it starts setting aside funds to invest to accumulate, with interest, the expected cost of the fleet purchase five years hence.

  • But those are not financial products (i.e., you can't buy a Christmas Club or sinking fund).
    – RonJohn
    Aug 7, 2021 at 19:49

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