That is a great question! Most annuities are linked to bond markets and interest rates on those bonds. The insurance industry is the largest purchaser of industrial and Government bonds, so their fortunes often rise or fall on the interest rates associated with those bonds. As long as the Fed keeps interest rates low, you will see your rates fall. I hope that helps, thanks for asking!
Insurance Adviser - Broker, SC Insurance Services, Oahu, Hawaii
The reason annuity rates are falling as you say is simply because interest rates are at historically low rates. Fixed Annuities are tied to the interest rates, and while they don't necessarily keep pace with the treasury and the national prime rate they do eventually come in line. Obviously since interest rates are very low currently they are bound to go up. As that happens we will see a rise in the rates annuities pay.
Variable annuities are tied to the stock market or a particular index depending on the annuity. As a result they can have a much greater return than fixed annuities, however they are also at high risk when the markets take a dive.
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Variable annuities are tied to the stock market or a particular index depending on the annuity. As a result they can have a much greater return than fixed annuities, however they are also at high risk when the markets take a dive.