So explain that "you receive a higher income lifetime return than other individual fixed income investments" again?
Dr. Brown at U of Ill-Champaign put in best when discussing immediate annuities and the risk-pooling of longevity..."Equally important, a life annuity has the potential to provide a higherlevel of sustainable income than can be achieved with other financial assets.This is because a life annuity is an insurance product that pools resources across a large number of annuity buyers, essentially using the resourcesof those who die earlier than expected to pay higher benefits to those who live longer than expected. The “cost” of this approach is that assets that are converted into a life annuity stream are no longer available to leave as a bequest. In exchange, however, the life annuity provides surviving individuals with a higher rate of return than the individual
could get on an otherwise similar, but unannuitized, portfolio.
The extra rate of return that a life annuity can pay is sometimes called a
“mortality premium” because it is essentially an extra rate of return that
annuitants can earn in return for giving up their claim on their assets at
death. To illustrate this concept in a simple, hypothetical example, suppose
that at the beginning of the year 100 people each invest $1 in bonds
earning 5 percent interest, and that 95 of them are still alive at the end
of the year. Each of the 95 survivors would have $1.05 to consume,
while the five decedents would leave $1.05 to each of their estates. If
instead, each of these 100 individuals had pooled his or her money
through an annuity contract, each of the 95 survivors would receive
$105/95 = $1.10 to consume. Thus, the annuity contract provides an
extra 5 percent rate of return – the mortality premium – in exchange for
reducing the resources available for a bequest."