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

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.

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Frequently Asked Questions

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

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