Underlying Interest Rates In Annuity Premiums

[Andy the Actuary]

Has anyone a handle (or website) whereby we can estimate the underlying interest rates used to determine individual annuity premiums? Also, to what extent are theoretical rates loaded for expenses, commissions, premium taxes, etc.

What I'm attempting to do is to ball park what annuities might cost in a plan termination. Is the lump sum rate a reasonable proxy?

[AndyH]

FWIW, we tell people to expect annuities to be 10-15% higher than lump sums, currently 15% based on most recent experiences. Deferred annuities are the most expensive I am told. Makes sense.

Another FWIW, I very recently checked a real quote for a 75 y/o female and it worked out to a 1.65% -2.% (net of expenses) interest assumption using 2011 female IRS mortality. And about 8 insurers were in the same range. But that is just an individual calc, not a group rate.

I also find this link useful:

http://www.immediateannuities.com/

I'd be interested in other comments.

[FAPInJax]

I agree that the interest rates appear to be between 1.5% and 3%. This is based on reviewing the annuity settlement option rates and then attempting to mimic them with a standard interest and mortality assumption.

[ScottR]

I've had good experiences with Dietrich Associates. Their website shows up to date interest rates for annuities, which are currently in the 3.75% - 4.25% range.

https://www.dietrichassociates.com/Default.aspx