Lifetime Annuity

Question 1

What is the cancellation period on the acquisition of a lifetime annuity?

A. There is no right to cancel on an annuity purchase.
B. 14 days
C. 30 days
D. 2 years

Answer 1

C. 30 days

Annuity purchases have a 30 days right to cancel

Question 2

What is a ‘Lifetime Annuity’?

Answer 2

A lifetime annuity is a retirement product that provides a guaranteed income for life. It’s a type of secure pension that converts your savings into a regular income.

Question 3

What are the major factors that govern the annuity rates on offer?

• A. The sex and age of the applicant
• B. Mortality rates and the prevailing long-term interest rate.
• C. The Retail Prices Index (RPCI)
• D. The level of benefits (e.g Guarantee period/)

Answer 3

B. Mortality rates and the prevailing long-term interest rate.

Question 4

An annuity provider will need confirmation of the annuitants age at the start of the contract, in order to:

A. Determine the annual increase rate.
B. Set the guarantee period.
C. Correctly price the annuity.
D. Determine the guaranteed benefit level.

Answer 4

C. Correctly price the annuity.

When the insurer enters into an annuity it is important for them to be confident of the risk they are taking on.

Question 5

What is the difference between a ‘Level Annuity’ and an ‘Escelating Annuity’?

Answer 5

A “level annuity” pays out the same amount of income each year, while an “escalating annuity” increases its payout each year by a fixed percentage or in line with inflation, meaning the starting income is lower but increases over time, protecting against inflation.

A level annuity gives a higher initial income, but an escalating annuity adjusts to inflation over time.

Question 6

What two types of annuity would mean a higher income and why?

Answer 6

Enhanced & Impaired Life.

This is due to life expectancy and can be based of health, certain behaviours such as smoking and hobbies.