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Immediate annuities - confusion with Core Reading

A

actuary-to-be

Member
I find it a bit confusing when the core reading refers to a Whole of life immediate annuity, it actually refers to a Whole of life annuity paid in arrears.

As it's mentioned at the top of page 4 in Chapter 2, "immediate" is to distinguish between annuities where the first payment is made in the first year and "deferred" annuities.

So, is it reasonable to assume that whenever a question mentions an "immediate annuity" it refers to an "annuity payable in arrear" (i.e. payments being made at the end of the year)? Or are there circumstances that this can mean an "annuity payable in advance"/"annuity-due" (i.e. payments being made at the start of the year).

In both cases the first payment is made within the first year, that's why I find confusing the way the core reading sets this out.

Anyone able to clarify?

Thank you
 
You are spot on.
"annuity-due" means in advance, "annuity" means in arrear.
"Immediate" means "as from now", and "deferred" (for n years) means "as from n-years time".

Have a go at this: at what exact future time is the first monthly payment made under an "n-year deferred annuity payable monthly"?

There can be no cases where an "immediate annuity" or a "deferred annuity" mean "payable in advance".

Robert
 
Thanks Robert.

From my understanding the n-year deferred annuity payable monthly will have its first payment at age x+n+1/12 (i.e. at time n+1/12 from now). Is that correct?
 
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