An annuity is a series of regular payments a person receives in exchange for a lump-sum or accumulated contribution. A lifetime annuity is paid until the recipient’s death. In Russia, similar solutions are offered by insurance companies (pension insurance, life insurance with annuity payments) and non-state pension funds (NPFs).

How a pension annuity works

  1. Accumulation phase. The client pays in a lump sum or makes regular contributions over several years.
  2. Payout phase. From an agreed date, for example retirement, the insurer pays the annuity monthly, quarterly or annually — for a fixed term or for life.

Unlike the state pension, the terms of a private annuity are set by the contract: the client chooses the contribution amount, the start date and frequency of payments and whether to name beneficiaries. It is a voluntary product that supplements rather than replaces state pension provision.

The payment amount depends on the accumulated sum, the recipient’s age and sex, the guaranteed return under the contract and the annuity option chosen. The calculation is made by the insurer’s actuary based on mortality tables.

Payout options

  • Lifetime annuity — paid until the recipient’s death and protects against the risk of outliving one’s savings.
  • Term annuity — paid for a fixed period, for example 10 or 15 years.
  • Annuity with a guaranteed period — paid for life, but if the recipient dies within the guaranteed period, the remaining payments go to the beneficiaries.
  • Lump-sum payment — some contracts allow the savings to be taken at once rather than as an annuity.

Pros

  • a stable additional income on top of the state pension;
  • protection against longevity risk: a lifetime annuity does not run out, however long the person lives;
  • the option to name beneficiaries in case of death — depending on the contract terms;
  • a guaranteed return fixed in the life insurance contract;
  • tax benefits.

Cons and risks

  • Inflation. A fixed payment loses value over time unless the contract provides for indexation or additional investment income.
  • Low liquidity. Early termination results in a surrender value that may be lower than the amount paid in, especially in the first years.
  • Long-term dependence on the insurer. The contract lasts for decades, so the company’s reliability is critical.
  • Complex terms. You need to study the guaranteed rate, how additional income is credited and the surrender value table.

Guarantees and taxes

DIA guarantees

From 1 January 2027, Russia will have a system guaranteeing individuals’ rights under life insurance contracts (Law No. 477-FZ of 26 December 2024): if an insurer’s licence is revoked, payouts — up to RUB 10 million for death-related payouts and up to RUB 2.8 million for other payouts — will be provided by the Deposit Insurance Agency (DIA). This will make long-term contracts safer but does not remove the need to choose a reliable company.

Tax deduction

Non-state pension contracts and, from 1 September 2026, life insurance contracts concluded from 2025 for at least 10 years qualify for the long-term savings deduction (Article 219.2 of the Tax Code) within the overall limit of RUB 400,000 a year. Check the conditions on the date you sign the contract.

Alternatives

  • Long-term savings programme (PDS) — operating since 2024 through non-state pension funds; it provides for state co-financing, a tax deduction and DIA guarantees.
  • Non-state pension provision — a contract with an NPF under which the fund pays a non-state pension.
  • Endowment life insurance — combines savings with protection against death or disability.

How to choose a programme

  1. Define your goal: additional retirement income, protecting your family or saving towards a specific date.
  2. Compare the guaranteed return, indexation terms and the surrender value table.
  3. Check the insurer’s reliability — see “How to Choose a Reliable Insurance Company”.
  4. Remember the cooling-off period: within the set period after signing, you can cancel the contract and get the premium back.

Life insurance programmes from different companies are presented in the “Life Insurance” section and in the insurance company directory. Polis Re specialists will help you compare terms — submit a request.