There are several different annuity options, all have a guaranteed income period of at least 60 months, so if a person dies on month 30 therefore a further 30 months would be paid to that persons estate. Annuity's can be purchased for spouse's and dependants also.
Some companies offer annuity investment protection e.g. person pays 100,000 for annuity which provides an income of say 5,000 p.a. and then after 6 years die's, then 30,000 would have been paid as income and the remaining 70,000 would be paid to the estate. Other companies offer an annuity rate at inception and then invest the capital in their managed funds. The advantage of this is that they can take lump sum withdrawals at any time which will reduce their annutiy rate pro rata. When a person dies they take the total income from the current value of the investment and pay this to their estate.
With an annuity the investment company bears the risk of a person living beyond average life expectancy and therefore annuity's merrits should be considered carfully especially if a person has no other source of income apart from social benefits.
AMRF/ARF
Proving very popular over the last few years with the introduction from life companies of self invested/directed funds. Rather than the life companies directing your money into their funds, you can elect to invest your money directly into Gov Bonds or bank deposits where you get perhaps 4 to 6% p.a. gross of charges over 4-6 year term. Other companies will have their own deposit fund and bond funds available also which may have similar returns.
The advantage of this kind of arrangement is that you retain control of the capital and you could take an income after charges of say perhaps 4% whilst not withdrawing any of the capital. Using 100,000 as an example 4% net of charges would provide an income of 4,000 p.a.
With this option the investor bears all the risk and should the bank or bond provider not be able to repay the deposit or bond the investor may loose some or all or their investment. This is a very real risk as it should be noted that several euro zone countries have let banks go to the wall over the years!