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📋 '''Lifetime annuity''' is an [[Definition:Insurance policy | insurance contract]] under which an [[Definition:Insurance carrier | insurer]] agrees to make regular payments to the [[Definition:Annuitant | annuitant]] for as long as that person lives, regardless of how long they survive beyond the expected [[Definition:Life expectancy | life expectancy]]. It is the purest form of [[Definition:Longevity risk | longevity risk]] transfer in the insurance market — the policyholder exchanges a lump sum or accumulated savings for the guarantee of income that cannot be outlived. Lifetime annuities are central to retirement systems worldwide, serving as the mechanism through which [[Definition:Pension | pension]] funds, individual savers, and employers convert accumulated wealth into secure retirement income.

🔄 At its core, the product works by pooling the longevity risk of many annuitants. Those who die earlier than expected effectively subsidize the payments to those who live longer — a principle known as [[Definition:Mortality credit | mortality cross-subsidization]]. The insurer prices the annuity using [[Definition:Mortality table | mortality tables]], prevailing [[Definition:Interest rate | interest rates]], and expense assumptions, then invests the premium in a portfolio (typically dominated by [[Definition:Fixed income | fixed-income]] assets) designed to generate cash flows that match projected payouts. Variants include [[Definition:Joint life annuity | joint-life annuities]] that continue payments to a surviving spouse, [[Definition:Period certain annuity | period-certain guarantees]] that ensure a minimum number of payments even if the annuitant dies early, and [[Definition:Inflation-indexed annuity | inflation-linked annuities]] that adjust payments with a price index. In the UK, the annuity market was historically compulsory for defined-contribution pension holders until the 2015 pension freedoms reforms, while in markets like Japan and Singapore, government-linked schemes provide a baseline of lifetime income that private annuities supplement.

💰 The importance of lifetime annuities is growing as populations age globally and the burden of retirement funding shifts from employers and governments to individuals. Without access to a lifetime income stream, retirees face the difficult task of self-insuring against the possibility of living far longer than average — a risk that is nearly impossible for an individual to manage alone but that insurers can handle efficiently through pooling. For insurers, writing lifetime annuities creates long-duration liabilities that require careful [[Definition:Asset-liability management (ALM) | asset-liability management]] and significant [[Definition:Capital requirement | regulatory capital]], particularly under [[Definition:Solvency II | Solvency II]]'s risk margin requirements or the U.S. [[Definition:Statutory reserve | statutory reserving]] framework. The [[Definition:Bulk annuity | bulk annuity]] market — where corporate pension schemes transfer their obligations to life insurers — has become one of the largest and fastest-growing segments in the UK and is expanding in other markets. Lifetime annuities sit at the intersection of insurance, investment management, and public policy, making them one of the most consequential products the industry offers.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Annuity]]
* [[Definition:Longevity risk]]
* [[Definition:Bulk annuity]]
* [[Definition:Pension risk transfer]]
* [[Definition:Asset-liability management (ALM)]]
* [[Definition:Mortality table]]
{{Div col end}}

Definition:Lifetime annuity - Revision history

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