That time of year again

Around this time of year, I watch the tax payable on my bonus and think. I should get an annuity. Unfortunately in this respect, I have too much knowledge to be sold by a regular agent.

An annuity is by nature a long term product. In my case it matures in 20 years. Therefore the decision in choosing your pension provider is not one to take lightly.

You must have a reasonable belief that the company will be around when you come to collect.

I've boiled it down to Tatil and Scotia. It's not that I don't have confidence in Guardian, Sagicor, Clico etc. It's just personal preference really and I have a hook up in both.

Second are you being sold the correct product. Whilst I was living in the UK there was a huge misselling of pensions scandal.

Basically they would sell you the product they got the most commission on, not the product that best suited your needs.
In the end the law judgement was that agents were liable for the first ten years of the policy life and persistency rates became part of regulatory reporting.

The persistency rate is the number of policies sold x number of years ago to which policyholders are still actively contributing. It is expected to decrease over time.

All the local insurance companies are front end commission based, hence the same incentive for misselling exists in the market. In one case the commission is as high as 40% of contributions in the first year. Evil.

So question for agent. What is your persistency rate? Even if I have to explain what it is, you should still be able to give it.

Second question, What life expectancy are your commutation factors based on?

The commutation factor is what is $1.00 worth at maturity for the rest of your life. Now we don't actually work out life tables for this country so you will be assumed to be living in the UK, US or Canada depending on the affliation of the company.

However hopefully as medical advances continue, it should be assumed that life expectancy also increases so that $1.00 should be worth more. Ideally the commutation in the quote should consider this.
For myself female at age 50 it should be somewhere between 12 and 15.

Next question is how are the assets managed and do you have control to balance the fund. This is a valid question for Scotia not for Tatil.
They should ideally have some long term bonds in the fund but the government doesn't issue many of these so we are always mismatching the durations of the assets to the liabilities in this country.

And at the end of all this I'll probably still end up banking on my tree farm.