Annuity Rates
Annuity rates used to calculate the amount of annuity income depends on a number of factors including:
- Age and health – the older the annuitant the higher the annuity payments and if they have certain health conditions they may qualify for a higher (enhanced) annuity
- The annuity options – e.g. single or joint life, level or increasing, income guarantee period or value protection and choice of payment terms.
- Interest rates – annuities are priced with reference to bond yields (fixed interest investments) so when yields are low annuity rates are low and vice versa (see chart)
Age and health
The annuity income for a given purchase price is higher for a 75-year old compared to a 55 year old, and it’s also higher for someone in poor health compared to a person without health issues. The reason for this should be self-evident; the longer the likely term of the annuity (i.e. how long the person lives), the more income is paid out overall.
Using life expectancy tables, a man aged 65 has an average life expectancy of 85 years and a woman is likely to live to age 87. Although men and women have different life expectancies, they get the same annuity rate because all annuities are quoted on a gender-neutral basis because of a European Union Gender Directive ruling in 2012.
rates
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