The Real Returns on Annuities
The "4.5% compound" salespeople quote is the guaranteed rate, not the IRR. The real IRR typically runs 1–2 points lower:
| Premium Plan | Payout | Advertised | Real IRR |
|---|---|---|---|
| Single CNY 1M | CNY 50K/yr from 60 | 4.0% | 2.8% |
| CNY 1M over 10 yrs | CNY 60K/yr from 60 | 4.5% | 2.5% |
| Whole-life (increasing) | Cash value growth | 3.5% | 3.2% |
Why the Real IRR Is Lower
1. Cash-flow timing mismatch. Premiums come first, payouts 20–30 years later — the time cost gets diluted.
2. Cash value ≠ total payouts. Surrendering returns only the cash value, far below the cumulative payouts.
3. Dividend realization. Participating annuity dividends float; long-run realization runs 60%–80%.
When an Annuity Makes Sense
Buy if you:
- Have CNY 500K+ idle cash and no mortgage
- Want absolute safety (insurers pay out as obligated)
- Need forced saving against overspending
- Want an estate shield (premiums aren't inheritance)
Skip if you:
- Are under 30 — 2.5% p.a. is too low
- Carry mortgage or auto debt
- Need the money soon
Annuity vs Increasing Whole-Life
| Feature | Annuity | Whole-life (increasing) |
|---|---|---|
| Payout | Monthly / yearly income | Lump-sum surrender |
| Liquidity | Poor | Better (partial surrender anytime) |
| Real IRR | 2.5%~3.5% | 3.0%~3.5% |
| Estate shield | Fairly strong | Strong |
| Best for | Retirement top-up | Wealth transfer |
💡 Skip the math — try the GFWPS tool:Annuity Real Return (IRR) →