214/98
21 December 1998
GUARANTEED ANNUITY OPTIONS
Treasury Provides Guidance to Insurance Companies
The Treasury has written to all life insurance companies on the issue of how the costs of guaranteed annuity options should be met.
The letter provides guidance to companies on the principles to be taken into account in determining their approach to meeting the costs of guaranteed annuity options. It is designed to ensure consistency in factors taken into account by life offices, rather than to prescribe the approach to be taken.
The letter makes clear that different approaches are likely to be appropriate depending on the nature of contracts involved and how they have been presented to policyholders. It emphasises the importance of the approach adopted being consistent with policyholders' reasonable expectations.