Changes here, changes there, changes, changes everywhere! Just when you think you know which annuity carrier has the best cap rates or the most competitive income rider, everything changes. Every day, producers ask me why the carriers are making these changes. Here’s a brief summary of some important changes:
Over the course of the past several months, the 10-year Treasury yield has continued to decline, falling to nearly 50 percent of what it was one year ago. And recently (on June 1), the yield on the 10-year Treasury fell to a record low—as low as 1.47 percent, which is the first time in history it has ever fallen below 1.5 percent.
When this happens, carriers are forced to strike a delicate balance between maintaining their product pricing while avoiding stripping too much attractiveness from the product or too much commission from the producer. Most carriers are reducing these benefits a little bit on both sides by shaving a small percentage off commission, reducing payout percentages and roll-ups on income riders and, inevitably, reducing caps.
My argument, however, is that even though some of these features and benefits may seem less attractive today than they were a few months ago, there are still a couple of good reasons why these products are highly marketable and beneficial to consumers.