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Mortality surplus in an annuity fund

Discussion in 'SA2' started by ActuaryEye, Nov 15, 2021.

  1. ActuaryEye

    ActuaryEye Member

    Most PPFMs that I have come across specify that mortality surpluses from annuitant mortality experience in an annuity fund belongs to policyholders. These funds are 90:10. Is there a specific reason why shareholders don’t participate in the mortality profit? I thought shareholder would also be entitled to a share in the surpluses since they also bear the risk if annuitants live longer than expected (mortality lighter than expected).
     
    ActuaryEye, Nov 15, 2021
    #1
  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    Yes, you are right, in a traditional 90:10 fund, surplus is split - 90% to policyholders and 10% to shareholders. And this comes through via the bonus system. Can I just check whether it is still a 90:10 structure when the policy becomes an annuity? You may also want to consider whether there has historically been approved reallocation of surplus between shareholder and policyholders.
     
    Em Francis, Nov 23, 2021
    #2
    ActuaryEye likes this.

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