Recent trends in UK longevity are likely to impact costs how?

The correct response reflects that recent trends in UK longevity are expected to have a lesser cost impact on endowments compared to annuities. This is primarily due to the nature of how these products are structured and their respective exposures to longevity risk.

Annuities are directly tied to the lifespan of the policyholder, as they are designed to provide a stream of income for the remainder of the individual's life. Therefore, increased longevity leads to higher costs for annuity providers, as they may be required to pay benefits for a longer duration than originally anticipated. As people live longer, insurers face greater financial pressure from longer payout periods.

In contrast, endowment policies typically combine life insurance with a savings component and have a predetermined maturity date. If the policyholder outlives the endowment term, they'll receive a lump sum at maturity rather than ongoing payments. Thus, the longevity risk associated with endowment policies is less direct and pronounced. Insurers can manage the risks associated with longer life spans in the context of endowments, leading to a comparatively smaller impact on costs from changes in longevity trends.

Understanding this difference helps in recognizing why the influence of longevity is forecasted to weigh more heavily on annuities than on endowments.