Hi,
Please could someone let me know if my understanding is correct. Thank you .
Q2) Deferred Annuity:-
I am slightly confused on the concept of a Deferred Annuity (DA).
Exam 2018 April, Q7, States
"A life insurance company has taken on the existing insurance risk of a pension scheme through a “bulk buy-out” arrangement. Under this arrangement the life insurance company has taken on the risk via a number of without profits deferred annuity liabilities to pay benefits to the members when they retire.
The company has incorporated the bulk buy-out policies (i.e. the deferred annuities) into its actuarial valuation model and processes, and is able to produce a monthly valuation of the liabilities. The policies and liabilities can be identified at a member level.
The company has been asked to provide transfer values (i.e. the value of the member’s deferred annuity, which they can transfer to another provider) to members at the point at which the members request them."
From an insurers point of view, does this mean a DA is such that the insurer receives premiums up to the retirement date of a policyholder
and then provides an annuity to the policyholder. Thus the policyholder is "locked-in" into taking an annuity with this insurer?
The third paragraph seems to suggest that for a DA the policyholder can transfer their policy to another insurer before the annuity starts (i think its called the vesting date?).
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