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Where are annuity contracts’ interest rates?


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For an insurance company’s fixed annuity contract (or fixed-interest element under an otherwise variable annuity contract), what is a typical credited interest rate?

 

And for such a contract issued recently, what is a contract-guaranteed rate?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Peter, sometimes I look here when needing a rough estimate:  https://www.dietrichannuity.com/, but this represents net settlement rates, usually for events such as DB plan close-outs.  Is that relevant to your Q?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Thank you for helping.  But no, I'm asking about interest crediting rates (and a guaranteed rate) on an annuity contract that is still in accumulation mode.

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Having worked for such annuity companies for years, my response would be that you must ask the ins. co.  This information can change daily for new quotes and there may be change options even in an existing contract.  If this is an existing contract, you can begin by looking at the contract summary sheet issued with the contract, but, again, you will probably have to contact the insurance company... or have the contractholder do it, if that is not you.   Many ins. co's today will have a very low contract base guaranteed rate.  It may be the state law minimum in the state of issuance.  Many of these companies were badly burned during the wild inflation rates of the Carter years.  (I sold one at a 17% guaranteed rate!  That was the highest one I ever sold.) They are very cautious about extended guarantees unless they can "lay off" the investment return in  commensurate "matching" investments right away.  (see Executive Life Insolvency to find out what can happen if "matching" is not used or is improperly used.)

Patricia Neal Jensen, JD

Vice President and Nonprofit Practice Leader

|Future Plan, an Ascensus Company

21031 Ventura Blvd., 12th Floor

Woodland Hills, CA 91364

E patricia.jensen@futureplan.com

P 949-325-6727

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Patricia Neal Jensen, thank you for the information.

 

Recently, I saw an accumulation annuity contract (and one that no one ever will take an annuity from) with a guaranteed rate of 1%.  I was surprised the guaranteed rate was that high.

 

Having worked through the insolvencies of Baldwin United, Executive Life, Mutual Benefit Life, Confederation Life, and others, I’ve seen the wreckage that can result from incautious promises.

 

Even at 0% interest, the insurer still is taking on risk.

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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