Sun Life Survey: Market Penetration for Variable Annuities Still Low

“Survey after survey shows that people are far more confident in their retirement planning when they have both a defined benefit and defined contribution component rather than just one or the other,” Deschenes says. “The guarantees that variable annuities provide give them that confidence, and it’s occurring at a time when they need to be replaced with other guaranteed source of income, as defined benefit plans are going away.”

The poll also identified several solutions to bridge the gap between retirement income needs and best practices. Nearly a third of financial advisors (27%) conclude that their clients aged 50 or older lack the knowledge to evaluate variable annuities. Over a third of advisors (38%) say better education would boost participation by those investors who would benefit from variable annuities. An equal proportion of financial professionals (38%) say making this asset class easier to understand would increase participation in variable annuities by those who would benefit from them.

Survey finding suggested that increased investor confidence in the value and credibility of variable annuities would boost participation in this asset class by those who would benefit from them. Nearly half of advisors (43%), for example, say lower fees would boost investment.

“It’s up to us in the retirement income planning field to show that guaranteed retirement income solutions are worth the money given the protection they help to provide against the risk of declining interest rates, the risk of a declining stock market, and the risk (if you’re are lucky enough to live a long life) of running out of money,” say Terry Mullen president of Sun Life Financial Distributors. “Investors are paying us to provide them a guaranteed income stream for 30 or 40 years. That’s an important service, since for most Americans, gone are the days of defined benefit plans, where the employer provided guaranteed lifetime retirement income.”