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Fixed Annuity Buyers Choose 1-Year Guarantees

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NU Online News Service, Dec. 21, 2004, 5:05 p.m. EST

Consumers may be trying to keep their powder dry.[@@]

A few years ago, when interest rates seemed to be in a permanent state of decline, many purchasers of fixed annuities wanted to lock in multi-year rate guarantees.

Now that rates are rising, shorter guarantee periods are in fashion, according to a new quarterly fixed annuity market report from Beacon Research Publications Inc., Evanston, Ill.

The firm collects data on 182 U.S. fixed annuity products from 52 manufacturers.

Annuities with 1-year guarantee periods accounted for 89% of ordinary fixed annuity sales during the third quarter, up from 82% during the second quarter, Beacon says.

In the index annuity market, products with monthly rate recalculation periods account for 56% of sales, Beacon says.