Annuities are benefiting from an environment in which interest rates have been rising since the end of 2020. According to a sample produced by the comparison site CANNEX Financial Exchanges Limited, annuities in 2023 are more generous for retirees than they were in 2022.
The data comes from two sample requests made by the Insurance Portal on the CANNEX site. The data from the two samples of the same seven insurers allow for a comparison of how much the monthly payments offered by annuities have increased as of September 25, 2023, compared to the payments offered on October 3, 2022.
The median (middle value of a data group) reveals an increase of 5.94% between October 2022 and September 2023. Some providers offer payments up to 8% or even 10% higher than in 2022.
7 Insurers, 6 ages
CANNEX displays the monthly payment of an individual life annuity for a man, with a 10-year guarantee. The annuity is constituted by a premium of $100,000 of non-registered funds. Payments begin the following month. The data covers six age brackets: 55 years; 60 years; 65 years; 70 years; 75 years, and 80 years.
The following insurers are included in the table: BMO Insurance, Canada Life, Desjardins Financial Security, Empire Life, Equitable Life Insurance, RBC Insurance, Sun Life. All data is available to subscribers at the EXECUTIVE Level of the Insurance Portal.
Sun Life leads in several scenarios, especially for younger annuitants. The insurer offered a monthly payment of $515.55 to a 55-year-old client subscribing to a $100,000 annuity on September 25, 2023, compared to $458.66 on October 3, 2022. That's 12.42% better. For a 60-year-old client, Sun Life offered $553.51 on September 25, 2023, instead of $498.77 nearly a year earlier, which is 10.97% more.
Age and gender play a role
The highest monthly payment as of September 25, 2023, also goes to Sun Life, at $850.88 for an 80-year-old client, closely followed by Desjardins Financial Security, which offers a monthly payment of $843.48 at the same age.
The older the client, the higher the monthly payment will be, as the insurer expects to have to pay the annuity for a shorter time due to a shorter life expectancy. Similarly, the monthly payment will generally be lower for a woman than for a man of the same age.
CANNEX displays daily data on the average of the top 5 monthly annuity payments. They demonstrate this male-female difference. On October 26, 2023, a 70-year-old man can receive a monthly payment of $660, compared to $626 for a woman of the same age.
Mostly collective
According to the 2023 edition of Canadian Life and Health Insurance Facts, an annual publication of the Canadian Life and Health Insurance Association (CLHIA), annuities are mostly subscribed on a collective basis. Thus, 70% of annuity contributions went to collective plans in 2022, against 30% towards individual annuities.
The data presented by CLHIA in its annual publication reveals that the industry collected $62.2 billion in annuity premiums in 2022. The vast majority of these premiums came from pension plans, Registered Retirement Savings Plans (RRSPs), and Tax-Free Savings Accounts (TFSAs).
This article is a Magazine Supplement for the November issue of the Insurance Journal.