“The investing public’s growing appetite for products that guarantee income for a lifetime has begun to manifest in the fixed annuity space,” writes David Port in an upcoming Senior Market Advisor feature.
In researching the annuities industry for the coming year, Port uncovered some interesting facts, particularly where fixed indexed products are concerned.
He says the strongest activity is being seen where “a growing number of manufacturers are rolling out deferred-income contracts designed to provide a guaranteed income stream beginning at a predetermined point in the future. Assets in these income annuities grow at a fixed rate for a period of time, after which the contract-holder can begin taking payments or opt to postpone them further.”
Symetra positions its Freedom Income Annuity as a form of “longevity insurance,” where “clients use a small portion of their savings, usually 10 to 15 percent, depending on age and deferral period, to buy a future income stream today, when the initial purchase payment will be quite small compared to the potential payout down the road.”
Also, be on the lookout as the next year or two could see a deluge of income annuity products, says Todd Erkis, a principal in the insurance consulting practice at Towers Perrin, as insurers search for solutions to liquidity challenges and longevity risk. “What is going to be the longevity product? We don’t know yet, but a lot of companies are looking to find a product that really hits that market well.”
As Port writes: “The fixed annuity product line-up figures to grow in the years ahead with the addition of more linked or combination products that allow contract holders to access account funds to cover long term care expenses.”
Federal tax breaks that provide favorable treatment to those types of products take hold beginning in January, says Joseph Montminy, research director at LIMRA. Montminy adds that he expects more of these products to hit the market as an appealing option for clients who otherwise would self-insure for long term care, or who have a need for both permanent life insurance and some form of LTC insurance.