Quick Annuity Query

athomick

My father-in-law died in December last year and had a small annuity. His last annuity payment was August (payments were twice a year 6 monthly in arrears). The pension company informs us that there is no final payment due to cover the period from his last payment in August until his death in December. Does this sound right? The payments were in arrears (I have paperwork which confirms that). Thanks.

DullGreyGuy

For in arrears policies you'd typically see a part payment just as for advance policies you'd expect a recovery. However there are no universal rules in annuities, especially if they stem from a buyout of a DB scheme, and so ultimately you need to read the policy document/scheme rules which should confirm 

Marcon

athomick said:

My father-in-law died in December last year and had a small annuity. His last annuity payment was August (payments were twice a year 6 monthly in arrears). The pension company informs us that there is no final payment due to cover the period from his last payment in August until his death in December. Does this sound right? The payments were in arrears (I have paperwork which confirms that). Thanks.

I'd go back with a copy of the relevant paperwork and ask them why, if payments are made in arrears, there is no 'balancing' payment due. Before you do that, have a quick look to see if there is any mention of what happens if an annuitant dies 'between payments' - although it's hard to see why a payment wouldn't be due.

DullGreyGuy

Marcon said:
although it's hard to see why a payment wouldn't be due.

Like anything, it can just be a "product feature" which ultimately the actuaries will include when pricing an annuity. There are vast variables in annuities, especially if originating from a buyout where they've had to replicate the rules of the original DB scheme but ultimate all just go into the formula with differing parameters. For second life benefits it can be named person, spouse at vesting, partner at vesting, spouse at death, partner at death, for all but the first there are varying probabilities of someone meeting the definition, still being alive and what age they are. Looking at reinsurance pricing you can also get death bed marriage exclusions and child bride reductions... in principle they could exist in the insurance too but cannot say I recall seeing them. 

dunstonh

Does this sound right?

When the annuity was bought, there would have been an option for with or without proportion.  If it is without proportion, then there is no proportional payment made.  If it is with proportion then it would include a proportional payment.

So, it sounds like it was bought without proportion.   Possibly as the annuity rate is slightly higher if you do not select that option.

athomick

Thanks everyone. This is the only terms I can find but it seems a bit obscure to me, is it clearer to others? 

DullGreyGuy

You need the rest of the policy document as the bottom text says

athomick

Don't have that sadly.