What interest rate and mortality table are used in annuity pricing?

Insurers use proprietary mortality tables based on annuitant populations (who self-select for good health). For regulatory reserving, the Society of Actuaries RP-2014 table with MP-2021 improvement projection is standard. Pricing rates reflect current market yields plus profit margin minus expense loading.

How does an annuity with a period certain differ from a pure life annuity?

A period-certain annuity (e.g., life with 10-year certain) guarantees payment for at least 10 years whether or not the annuitant survives. This reduces the payment amount versus a pure life annuity because the insurer bears less mortality risk. Period-certain annuities are common in pension elections.

Life Annuity Mortality-Adjusted Payment

How It Works

Calculate life annuity payment for a given premium using mortality-adjusted present value: payment = premium / sum of (survival probability x discount factor) across all age-based projection periods

Each component has a specific meaning:

Mortality-adjusted present value: payment = premium / sum of across all age-based projection periods — The mortality-adjusted present value: payment = premium / sum of across all age-based projection periods recorded for the scenario being assessed.

Note: Interpret the life annuity payment result against the thresholds and context described above.

How to Use

Enter the mortality-adjusted present value: payment = premium / sum of across all age-based projection periods for the scenario you are assessing. Calculate life annuity payment for a given premium using mortality-adjusted present value: payment = premium / sum of (survival probability x discount factor) across all age-based projection periods. Use the life annuity payment result to inform your calculation.

Related Calculators

Annuity PV Factor

Finance Long-tail

Mortality Improvement MP-2021