Why are annuity surrenders rising in 2024 and 2025?

Three forces are driving the surge: (1) policies issued in 2018 to 2020 at sub-3% rates are reaching the end of their surrender schedules, (2) current top MYGA rates are 200 to 250 basis points higher, and (3) carriers have streamlined 1035 exchange paperwork.

Should I exchange my old annuity for a new one?

Check your original contract's surrender schedule first. If you are past the surrender period, compare the current top MYGA rate to your existing rate. A 200+ basis point pickup over a 5-year term typically more than justifies switching. If you are still in the surrender period, the surrender charge and any MVA drag usually wipe out the rate benefit.

Annuity Surrenders Surge: 1035 Exchanges Hit $260B (2026)

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Published April 15, 2026 by the AnnuityJournal Editorial Team.

WINDSOR, CT – Annuity surrender activity climbed sharply in 2024 and 2025 as a large wave of policies issued during the 2018 to 2020 period reached the end of their surrender charge schedules. LIMRA estimates industry surrender outflows reached approximately $260 billion in 2024, with full-year 2025 data expected to show a similar pace. Much of that money did not leave the annuity market; it was 1035-exchanged into newer contracts carrying higher guaranteed rates.

The surge underscores a straightforward feature of the fixed annuity market: rate competition. Buyers whose original contract was issued at sub-3% MYGA rates in 2019 have been moving to contracts now offering 5% or more once surrender periods expire. For many of those buyers, the switch adds hundreds of basis points to long-term yield without triggering taxable events, thanks to the 1035 exchange rules.

Why Surrender Activity Is Rising

Three forces are driving the 2024 to 2025 surge:

End-of-surrender cliff from 2018 to 2020 vintages. Many 5-year and 7-year MYGA contracts issued at low yields in that window are now surrender-free and eligible for rollover.
Wider rate spreads. Top MYGA rates in 2025 averaged 4.8% to 5.6% on 5-year terms, compared to 2.5% to 3.0% on the same terms in 2019. That is a 200 to 250 basis point pickup for policyholders who switch.
Cleaner 1035 exchange processes. Carriers have streamlined direct-to-direct transfer paperwork, making exchanges faster and less prone to disqualifying tax events.

What a 1035 Exchange Actually Does

Section 1035 of the Internal Revenue Code allows a policyholder to transfer the cash value of one annuity contract directly into another without triggering income taxes on the embedded gain. The tax basis carries forward to the new contract, and the IRS does not treat the transfer as a taxable distribution.

Two points matter for buyers. First, a 1035 exchange must move from insurer to insurer directly; any distribution to the policyholder first breaks the exchange and creates a taxable event. Second, the new contract must be the same tax-category product (annuity for annuity, life insurance for life insurance, or life insurance for annuity). For the full mechanics, see our 1035 exchange guide.

Surrender Charges Still Apply Pre-Maturity

Buyers considering a surrender before the scheduled end date should check the surrender charge schedule on the original contract. Most MYGAs and FIAs impose surrender charges starting at 8% to 10% in year one, grading down to 0% at contract maturity. Surrender during the charge period almost always wipes out any rate gain from switching. Most 2024 to 2025 exchange activity has come from contracts that have already reached the end of their surrender schedule.

There are also market value adjustment (MVA) provisions on some contracts, which can increase or decrease the surrender amount based on interest rate movements since issue. Always review the MVA language before initiating an exchange.

Carriers Gaining and Losing Share

The carriers benefiting most from the exchange wave are the alternative-credit-backed MYGA specialists, including Athene and Global Atlantic, whose top-of-market rates are drawing the bulk of exchange dollars. Older book-of-business carriers with legacy low-rate contracts are losing more in surrenders than they are gaining in new sales.

For buyers, the takeaway is that shopping matters. A 2019-era contract paying 3% that is now out of surrender should be compared against current top-rate A-rated carriers on our best MYGA rates page before deciding whether to stay or roll.

What Buyers Should Do Now

Pull your original contract. Identify the issue date, term, guaranteed rate, and surrender schedule end date.
Calculate your remaining surrender charge. If it’s zero or low, an exchange is likely worth considering.
Shop current rates. Compare against at least three A-rated carriers on the same term.
Run the breakeven math. The new rate minus the old rate, over the new term, should more than compensate for any remaining surrender charge or MVA drag.
Initiate direct insurer-to-insurer transfer. Never take a distribution yourself; that breaks the 1035 treatment.