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Why do annuities pay differently for women and men?

Dear Nancy Woods,

Why does an annuity of the same amount pay out less for women than men of same age? - Ann

Dear Ann,

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If an annuity is a term-certain annuity (i.e., it pays out for "exactly" 10 years, no more, no less), there is no difference in income for a man versus a woman.

However, if the annuity is a life annuity (i.e., the income pays out for as long as the annuitant is alive), the payout is lower for women than for men, since we statistically live longer. If a man and a woman each purchase a life annuity at age 65, the expectation of the insurance company is that the man will die first, so they can pay him slightly more per month as they will ultimately pay for fewer years.

Where confusion sometimes arises with clients is when there is a guarantee period on a life annuity.

A life annuity with a 10-year guarantee period is an annuity that pays as long as the annuitant is alive but for no less than 10 years. (In other words, if the annuitant dies before the decade is up, continued payments or a commuted lump sum would be payable to a beneficiary.)

A 10-year term-certain annuity, again, pays for exactly 10 years no matter how long the annuitant lives, and the same amount regardless of gender.

As the old joke goes, you are betting against the insurance company that you are not going to die. It generally is a losing bet.

Nancy Woods is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. You can send your questions to

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