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Indexed Contracts Outperform CDs

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Annuities with returns linked to the performance of the stock market or other investment markets have been generating returns that are about twice as high as bank certificate of deposit returns.

Researchers at Advantage Compendium Ltd., St. Louis, have published data supporting that conclusion in a report based on a review of data from 24 carriers that have been offering reset index annuities since 2003.

The researchers found that the value of assets in the annuities in the sample has increased an average of 5.4% per year over the past 5 years, compared with an average total increase of just 2.78% for the value of assets held in a series of 1-year bank certificates of deposit, the researchers conclude.

The annualized return for an S&P 500 index fund with a 0.15% expense ratio over the same period was 5.05%.

Advantage researchers note that the comparison period ended Sept. 30.

The S&P 500 dropped 27% between Sept. 30 and Oct. 27, and principal guarantees could have increased the advantage of indexed annuities over bank CDs over that period, the Advantage researchers write.


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