Compare annuity and lump sum.

The major differences between annuity and lump sum are as follows −

Annuity

• The payments are spread across the period of time.

• An investor who wants regular inflow of payments prefers annuity.

• It is short term in nature.

• The types of annuity are deferred and immediate.

• An amount received is very less to take decision about investment or business.

• The cash flow will add up to larger amount.

Lump sum

• The payment is made at once.

• An investor who is willing to get the money at point of time will prefer lump sum.

• It is long term in nature.

• There are no types in lump sums.

• It includes high tax burden.

• The payment is taken upfront.