Fee changes in the U.S. variable annuity market dropped by half in the third quarter, to 10 compared to 20 in the second quarter, as more carriers held costs steady in light of the nation’s persistently slow economic recovery.
“Fee changes dropped by half, indicating that the majority of carriers have made their pricing adjustments in response to the new market realities,” according to a Nov. 29 report released by the Insured Retirement Institute (IRI) and compiled by Morningstar.
Fidelity Investments Life Insurance Co. decreased mortality and expense (M&E) fees to 0.20% from 0.25% and administrative fees to 0.05% from 0.10% on two personal retirement annuities.
– Guardian Insurance & Annuity Co., to 0.40% from 0.25%, for its highest anniversary value death benefit;
– Lincoln National Life, to 0.70% from 0.65%, for M&E on its American Legacy Shareholder's Advantage and ChoicePlus Assurance A-Share, as well as a fee percentage increase to 0.50% from 0.40% for its i4LIFE Advantage benefit;
– Mutual of America Life, to 0.20% from 0.25 for M&E, to 0.50% from 0.40% for administration, and to 0.50% from 0.35% for distribution for its Section 457 Contract, Thrift Plan, and Variable Annuity Accumulation products;
– Variable Annuity Life, to 0.70% from 0.65%, on its IncomeLOCK product.
“From a trend standpoint, in late 2008 and most of 2009, the fees went up. More recently this year, fees are going down,” said Danielle Holland, IRI’s vice president of communications and research, in an e-mail. “While decreases may be a bit rarer, there have been SEC filings this year by carriers that reduced their fees. For 3Q, there were both increases and decreases, thus the assertion that carriers have made pricing adjustments.”
Popularity of Lifetime Benefits Grows as Boomers Retire
The IRI/Morningstar report also found a pick-up in new benefits for the third quarter, with triple the number of newly issued lifetime benefits versus the second quarter, reflecting the rising popularity of lifetime benefits as boomers enter their retirement years.
“Throughout the year consumers have heavily gravitated to lifetime withdrawal benefits, and this past quarter was no exception,” said Insured Retirement Institute President and CEO Cathy Weatherford in a statement. “Given that six out of 10 boomers within five years of retirement are concerned about outliving