Life Annuity (the pension)
Sum paid periodically (monthly or quarterly) to the seller until their death, calculated according to the value of the property and life expectancy.
Full definition
The life annuity is the periodic payment (generally monthly) that the buyer (annuity debtor) undertakes to pay to the seller (annuitant) until the latter's death. It is the central element of the life annuity contract.
The calculation of the annuity takes several factors into account: the market value of the property, the amount of the bouquet, the seller's age (life expectancy according to the mortality tables), and, in the case of an occupied life annuity, the value of the occupancy right. The younger the seller, the lower the annuity, as it is paid over a potentially longer period.
The annuity is index-linked annually, generally to the consumer price index, in order to maintain its purchasing power. In the event of non-payment, the seller benefits from guarantees (seller's lien, rescission clause). In Luxembourg, part of the annuity may be tax-exempt depending on the seller's age at the time of the sale.
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Related terms
Bouquet
Capital sum paid to the seller on the day the deed of sale via life annuity is signed, generally between 20% and 40% of the property's value.
Index-Linking
Annual revision of the amount of the life annuity according to an index (generally the consumer price index).
Annuity Debtor (Buyer)
The buyer of the property under a life annuity, the person who pays the bouquet and the life annuity to the seller.
Rescission Clause
Contractual provision allowing automatic cancellation of the sale in the event of non-payment of the annuity by the buyer.
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