Interest Rates

Interest rates represent the cost of capital or what you pay to borrow money. A detailed definition of interest rates is beyond the scope of this glossary. What is important to remember is that interest rates are critical components of virtually every financial product you consume. This is especially true with annuities because, in general, insurance companies manufacture annuity products through a combination of bonds and derivatives. As a result, interest rates are the raw material of all annuity types.

Calculating the Value of a Pension Buyout Offer

One way to evaluate a...

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Lack of Yield Results in Variable Annuity Product Revamp at MetLife

Metlife posted record variable annuity sales of $8.6 billion during the most recent quarter. The VA sales record represents an 86 percent increase from the same period a year ago. MetLife also announced that it will be lowering the returns offered on future variable annuity offerings in an effort to “re-price and improve the risk profile” of their product offerings. Record low interest rates have made it difficult to sustain the richer product features contained in the current...
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Sun Life Financial Warns on Third Quarter Earnings

The following is a summary of stories related to the recent earnings warning from Canadian financial services company Sun Life. <a href="" mce_href="" target="_blank">View "Sun Life Financial Warns on Third Quarter Earnings" on Storify</a>

Record High Deficits for Defined Benefit Pension Plans

Defined benefit pension plans are the traditional and increasingly rare type of pension plans offered through employers. In contrast to defined contribution pension plans such as the 401(k), participants in defined benefit (“DB”) plans receive contractually guaranteed income and assume none of the risks (investment risk, interest rate risk , longevity risk , etc) associated with producing that lifetime income stream. The problem is that defined benefit plans are scarce, and many of...

Why Low Interest Rates Increase the Cost of Your Personal Pension Plan

Retirees and those saving for retirement should think of themselves as the managers of their own personal pension plan.  

Many people used to have access to a traditional, defined benefit pension plan through their employers.  With a defined benefit pension plan, someone else (an employer or professional managers hired by an employer) assumes responsibility for managing plan contributions, investments and...