It has recently been reported across a wide array of media outlets, drawing from an even wider array of economists, analysts and policy-makers that 2013 will look and feel a lot like 2012 and the Insured Retirement Institute (IRI) seems to concur.
In its new report, IRI’s outlook for 2013 indicates that many of the same issues, trends and dynamics that the industry dealt with this year will play out yet again through 2013, cementing the idea of a “new normal” that, if it has not already been adapted to and planned for, could pose some hurdles for companies that acclimate slowly.
The report mentions ongoing product innovation, demographic shifts that will drive consumer demand for retirement products and the continuous low-interest rate environment as events that will make their mark on 2013 just as they did on 2012.
From a public policy perspective, the combination of the fiscal cliff and the debt ceiling negotiations are the most urgent issues to potentially have an effect on the retirement industry. A priority for the industry during the tense bargaining must be to preserve the tax-deferred status of annuities and retirement savings plans. This is crucial as many Americans are underprepared for retirement and will soon be retiring in droves. The preferred tax treatment is an incentive that the industry and some would argue the country, cannot afford to have compromised-away.
The report also warns of changes on the horizon on the regulatory front. A modified report from the Department of Labor’s Employee Benefits Security Administration is expected to be re-proposed in 2013. The contents of the proposal would change the circumstances under which investment advice given by a professional is considered “fiduciary” under the Employees Retirement Income Security Act of 1974. The industry is worried that the proposed rule would increase costs and complexities while limiting consumer choice.
IRI sees deferred income annuities (DIAs) as being a popular product in 2013. DIAs, which experienced strong sales in 2012, will be tailored by the industry to include new product offerings and product innovations. These innovations and offerings are seen to be so crucial to the product class that IRI sees DIAs becoming “the fastest growing product of 2013.”
The variable annuity market will move away from living benefits in 2013 and will focus on developing products for customers whose primary interest is in tax deferral or diversifying into different asset classes. This trend, IRI states in its report will continue well into the year. As far as indexed and single premium immediate annuities are concerned, IRI sees ongoing innovation taking place in distribution.