A new money rate is the interest rate an insurance company offers to new customers purchasing an annuity today. It reflects current market conditions and the insurer’s current pricing strategy. The new money rate is what you see when you compare fixed annuity rates on rate shopping sites.
New Money Rate vs. Renewal Rate
When your existing MYGA matures, the insurer offers a renewal rate for keeping your money in place. This renewal rate is almost always lower than the new money rate the same carrier offers to new buyers. The gap exists because insurers use competitive new money rates to attract deposits, while renewal rates are set with less competitive pressure.
This is the primary reason most annuity owners do a 1035 exchange at maturity rather than accepting the renewal. By transferring to a new carrier at their new money rate, you recapture the competitive pricing.