There is a great deal of continuity in the demographics and attitudes of nonqualified annuity owners.

That is one finding of the “2005 Survey of Owners of Nonqualified Annuity Contracts” from the Committee of Annuity Insurers. Conducted by The Gallup Organization and Mathew Greenwald and Associates, it is the ninth such survey. It probes the demographics and attitudes of NQ annuity owners.

In general, NQ annuity owners remain a predominately older, middle-class group of individuals with at least some college education and diverse occupations.

But in 2005, there were some notable changes, too. For example, an increased proportion of NQ annuity owners are women and owners of fixed (as opposed to variable) annuities. Also, the owners show increased concern regarding the risks that health and long term care costs pose to their retirement strategy.

In addition, the 2005 survey reveals that current workers and retirees have significantly different expectations regarding their sources of income in retirement.

As for demographics, the survey shows that most annuity owners purchased their first annuity before age 65 (83%). The average age for this was 50. The proportion of fixed annuity owners who were under 50 when they bought their first annuity has increased from 28% in 2001 to 39% in 2005. The average age of nonqualified annuity owners is 66. And, as noted, NQ annuity owners are more likely to be female than male (56% vs. 44%). For women, this represents an increase of 8% from 2001. Also, 58% are retired, whereas 35% are employed either full or part time.

Their annual household incomes tend to be moderate–66% are below $75,000 and 33% are below $40,000 (up 8% from 2001), while only 18% are at $100,000-plus.

Most (87%) believe they have done a very good job of saving for retirement. But they do have concerns here. A key concern is the cost of catastrophic illness or nursing home care. Almost 28% believe they or their spouse are at a high risk of needing to be confined to a nursing home in old age, an increase of 4% since the 2001 survey.

Similarly, 37% believe they or their spouse are at a high risk of suffering a catastrophic medical condition in old age, up 7% since 2001. In addition, nearly half (49%) are concerned that a catastrophic illness or need for nursing home care will bankrupt them in retirement.

How will NQ annuity owners use their annuity savings? Seventy-eight percent intend to use the money for retirement income. In addition, eight in 10 say they will use the savings as a financial cushion in case they or their spouse live well beyond life expectancy (83%) or to avoid being a financial burden on their children (81%).

Consistent with concerns about the costs of catastrophic illnesses and nursing home care, 70% say an important reason they purchased an annuity was to cover the potential expense of unpredictable events such as a catastrophic illness or the need for nursing home care.

Most view tax deferral as an incentive to save. Nine in 10 agree that keeping the current tax treatment of annuities is a good way to encourage long-term savings (91%) and that annuities are an effective way to save for retirement (90%). Over nine in 10 (92%) report they are trying not to withdraw money from their annuities before retiring because they would have to pay tax on the withdrawn amount; this is up 4% since the 2001 survey.

Expectations do differ by employment status. Retired owners generally view Social Security and money their employers put into a retirement plan for them as more important sources of income in retirement than owners who have not yet retired. Respectively, 58% and 47% of retired owners cite these as major sources of expected retirement income, compared to 34% and 43% of non-retired owners.

In contrast, those not yet retired generally view themselves as more responsible for their own retirement security, and thus are more likely to cite their own personal savings such as annuities and other investments (39% non-retired vs. 26% retired) or money they put into a retirement plan at work (41% non-retired vs. 21% retired) as major sources of expected retirement income.

What conclusions can be drawn from this data? First, the survey shows that NQ annuity owners are pleased that they purchased an annuity. They generally have very positive views of their annuities and the role their annuity has played in helping them achieve a comfortable retirement.

Second, and equally important, the findings demonstrate that annuities are a retirement policy success story. In a nutshell, middle Americans buy annuities to help fund their retirement and they use them for that purpose.

Unfortunately, there are not enough successes in this arena, as far too many individuals are not preparing adequately for retirement. Officials in Washington constantly are looking for ways to address this problem. Looking at the survey, it seems clear that one product that works for middle Americans is a nonqualified annuity. Individuals buy the policies seeking financial security in retirement, and they use their policies to provide that security.

As a result, policymakers should be focusing more on how to broaden the use of annuities beyond the many individuals who already have discovered the extraordinary value of this product.