Which type of annuity provides payments immediately upon purchase?

An immediate annuity is specifically designed to start making payments to the annuitant right after it is purchased. When an individual invests in an immediate annuity, they typically pay a lump sum upfront, and in return, they begin receiving regular payments almost immediately, often within a month or so. This structure is particularly appealing to those who need immediate income, such as retirees who are looking for a consistent cash flow right away.

In contrast, a deferred annuity involves a waiting period before payments commence, which can span from a few months to several years. This distinguishes it significantly from an immediate annuity. Fixed deferred annuities, as a type of deferred annuity, are intended for individuals who plan to grow their investment through interest accumulation over time before receiving payouts in the future.

A single premium deferred annuity also requires an upfront lump sum payment but does not begin disbursing payments until a specified later date. Thus, these types are not designed for immediate income. The immediate annuity's feature of instantly starting payment sets it apart and directly aligns with the need for immediate financial fulfillment, which validates its selection as the correct answer.