WINDSOR, Conn., May 13, 2013 — A recent joint LIMRA/CANNEX study finds that a majority of the companies offering income annuities have added features designed to address consumer concerns and attract new sales.
Income annuities provide a guaranteed stream of income for as long as the owner or annuitant lives and can ensure that this income covers both lives of a couple. The study, Features in Income Annuities, surveyed 39 insurance companies that offer income annuities representing 84 percent of the 2012 industry sales.
Many income annuities now include features that offer retirees increased access to cash or liquidity in case of an unforeseen need. Other features include death benefits to address the event of a premature death and flexible income options to keep up with inflation. All these features are designed to make income annuities an appealing part of anyone’s portfolio.
“There is a disconnect between the need and the amount of sales,” said Lowell Aronoff, CEO at CANNEX. “Retirement income research universally suggests that income annuities should be a core product for nearly all retirees. Yet sales of these products are still fairly modest.”
In the past, one objection of advisors to recommending income annuities for their clients was loss of liquidity. However, the majority of immediate annuities — including 9 of the top 10 companies — now offer access to cash outside of their scheduled payments in case of emergency or other needs. Liquidity may come in several forms: access to the guaranteed payments, access to the life contingent payments or an acceleration of several months of scheduled payments in advance.
Assurance of receiving death benefits can offer owners and their beneficiaries peace-of-mind and confidence during the purchase process. All carriers surveyed offer the simplest form of death benefit, where if the annuitant dies, payments will continue to their estate for a specified number of years and most provide the option to guarantee that the client never loses money by continuing guaranteed payments until the sum received equals the initial amount invested. Most of the companies in the survey (31 out of 39) offer at least one death benefit that provides additional money upon the annuitant’s death as a payout option.
Currently, all of the top 10 companies offer a Cost of Living Adjustment (COLA) option that allows retirees to receive increasing income and address one of their chief concerns, inflation. Retirees can choose various COLA rates of up to six percent increases or more. Other companies offer payments that are pegged to the Consumer Price Index.
“Advisors who are engaged in retirement income planning are beginning to take a second look at income annuities.” said Mark Paracer, LIMRA research project director. “LIMRA research indicates that there will be as many as 64 million retirees by 20251. Including an income annuity — either deferred or immediate — can help retirees ensure that at least their essential expenses in retirement are covered, allowing an advisor to invest the remaining portion of their portfolio with a goal of higher returns.”
Conducted in 2013, the LIMRA study Features in Income Annuities — Immediate and Deferred Income Annuity Designs surveyed 39 insurance companies that represent 84 percent of the industry immediate income annuity sales in 2012, including all of the top 10 companies. Seven of these companies offer a deferred income annuity. This joint study builds on 2007 CANNEX study on income annuity features.
1 The Retirement Income Reference Book (2012), LIMRA
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LIMRA, a worldwide research, consulting and professional development organization, is the trusted source of industry knowledge, helping more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com
CANNEX Financial Exchanges Ltd. is an independent and privately held company that facilitates the sale of financial products. CANNEX compiles data and calculations about a variety of financial products and makes that information available to financial service providers and the media through a central exchange. The Retirement Income Product Exchange (RIPE)™ is a service through which financial advisors can obtain comparative pricing and data about fixed deferred and income annuity products from across the industry. The service also includes tools and educational material that helps position guarantees as an integral part of a client's retirement income portfolio. The CANNEX Income Annuity Exchange is a part of the RIPE service. For more information about CANNEX, visit www.cannex.com.