While considering annuity rates, there are some important interest rate components which should be focused upon. An annuity contract comprises of four major interest rate components. Base-Guarantee rate is the minimum rate, varying between 1 to 3.5 per cent that an annuity can yield. Current rate is the revised rate for in-force annuity contracts to ensure competitiveness with the industry. Some annuity contracts offer occasional bonuses, which are expressed by a Bonus rate. Lastly, Yield to surrender is the forecasted effective rate of return during the period of the contract. Like with any other dealing, don’t show haste in choosing the annuity rates. Pick the one that suits your needs the closest.
Among the four interest rate or annuity rates components, yield to surrender is the most important factor to consider. It should be offered at a guaranteed minimum rate and calculation of yield to surrender can determine the soundness of bonus rate. Besides the interest rate components, a company’s renewal rate should also be considered while decision making. A renewal rate history represents the long term performance of the insurance company. The analysis of renewal rate with interest rates and market conditions can predict the long term performance of the annuity. When searching for companies to help you choose the annuity rates, be aware of charlatans, and do not give out personal information to anyone without proper research.
Some stable insurance companies offer additional return on some high quality contracts. This excess rate is known as bailout rate, which is usually set above the base guarantee rate. If interest rate falls below this rate, the investor can nullify the contract without any penalty. Like renewal rate, bailout rate is also an important component to consider in annuity rates since it offers freedom to the investor and opens up options for the investor to place his/her funds without the cost of losing his annuity. All the factors mentioned above can collectively provide a reliable prediction of the success of an annuity contract.
Every annuity holder wants to make sure that he can save the most for his future, so a higher annuity rate is always a desirable characteristic. Since annuities are a long term financial instrument, it is important that the annuity rates are compared. A benefit of comparing Annuity rates is that you can buy an annuity from the best insurance company from your own analysis. However, if you don’t have the required time to analyze your options, you can hire a professional annuity consultant who can find out the best possible option for you. Choosing annuity rates can have a major effect on your future, so you should not hesitate to take out your time to find the best annuity plan for yourself.