Boomers are good for annuities. The annuities market experi- enced a good year for growth in
2014, despite interest rate headwinds,
and 2015 shows signs of continued
strength as boomers look for retirement
income, issuers seek product innovations and 401(k) plans offer deferred-income annuities in target-date funds
now that the U.S. Treasury Department
has given them the thumbs-up.
In its “State of the Insured Retirement
Industry” 2014 review and 2015 outlook, the Insured Retirement Institute
said product issuers remain financially
strong, while balance sheets are sound
and post-2008 risk management efforts
are yielding positive results.
Key trends for annuities coming
out of 2014 into 2015 include mod-
estly increasing sales, highlighted by
a shift in product types. IRI reports
that industrywide sales rose 4.3% in
2013 and appear on track for a similarly
modest increase in 2014.
With neither year showing significant growth, the bright spot for sales
should come from the shift into fixed
products and away from variable annuities. Indexed annuities, single-premi-um immediate annuities (SPIAs) and
deferred income annuities (DIAs) are
the strongest contenders in the fixed
market, according to IRI.
“As 2015 approaches, persistently
low interest rates are a formidable
headwind, but demographics and grow-
ing consumer awareness of the need to
create an effective retirement plan that
includes the use of guaranteed retire-
ment income products and solutions
continue to create a favorable market
environment for annuities,” according
to this year’s IRI report.
ClIents ReCeptIve to AnnuItIes
IRI’s survey of advisors said three-quarters reported their clients are
receptive to annuities, with 90% interested in guaranteed income in retirement. Overall, industrywide annuity
sales are on track to rise 3% to 5% in
2014, IRI said. A year ago, IRI similarly
predicted more product innovation and
ongoing consumer demand for annuities, and reported that 44% of financial
advisors planned to grow their annuity
business in 2014.
Todd Giesing, senior analyst with
LIMRA Secure Retirement Institute,
said 1. 5 million boomers are on track
to retire every year between now and
2025, which is helping to drive growth
in annuity sales as retirees and pre-retirees look to supplement pensions
and Social Security.
“When we look at boomers, that’s
a big pool of retirees who will need
income later, which sets the stage for
the demand we’re seeing now in guaranteed lifetime income solutions, which
annuities can help fulfill,” Giesing said.
Variable annuity sales, which continue to be the largest segment of the
market, are expected to be down 3% to
4% in 2014 versus 2013 sales totaling
$145 billion, he added. Three out of four
consumers elect guaranteed living benefit riders in the VA market when available, according to LIMRA’s research.
Boomer demand for Annuities
to stay High despite low Rates
Three-quarters of advisors say most clients want
guaranteed retirement income, IRI report shows
By Joyce Hanson