Like the low rattle of a drum, the chorus, “annuity rates suck!” has been building to a crescendo over the past few years in this business. It seems that every agent I speak with blames the historical low interest rates for their declining sales of fixed and indexed annuities.
Personally, I am in awe each time I hear this complaint. After all, it is the guarantees in fixed and indexed annuities that consumers go wild for. That being said, I have to cut everyone some slack because rates really are bad and you obviously remember how much easier sales seemed to come when they weren’t.
So, I’m not sure about all of you, but I’ve had it. That is why with much enthusiasm, I have recently welcomed an increase in fixed and indexed annuity rates. Drum roll please.
Wahoo! Yippee! So much for excuses! I don’t want to hear it any longer. Annuity rates are on the uptick, so it is about time that sales reflected it!
But I can’t throw a party just yet…as of the date of this drafting, the average fixed annuity rate was just slightly less than 3 percent. And although this is an improvement, fixed annuity rates have been on a steady decline since hitting an average high of 5.53 percent in July of 2006. While recent rate announcements show promise, annuity rates aren’t even close to being back in the 5 percent to 6 percent range yet.
When will they get back to those higher rates? That depends a lot on the performance of the 10-year Treasury. How has the 10-Year Treasury affected fixed annuity rates? Let’s take a look:
What a great feeling after last year thinking that things couldn’t get any worse. Today we are back on the uptick! Insert smile here.
And the positive increase in the Treasury is affecting things other than just fixed annuity rates. Indexed annuity annual point-to-point caps were averaging a mere 3.07 percent in the last quarter of 2012, but today they are back-up to 3.83 percent! A few companies have even made favorable changes to their annuity products recently. New product enhancements include increases in Guaranteed Lifetime Withdrawal Benefit payouts and rollups, as well as increases in the premium bonus amounts offered on fixed and indexed annuities.
So while we may not be back to the days of selling annuities with 10-year surrender charges, 10 percent premium bonuses, and 7 percent caps, things are getting better. BTW when we could sell an indexed annuity like that, we didn’t seem awfully motivated; 2008’s indexed annuity sales were a mere $26.7 billion. Interestingly, sales hit a big ‘ole record of $34 billion at the close of last year, during the worst interest rate period ever. A 27 percent increase in sales isn’t too bad when rates are down more than 51 percent. Just sayin’!
Keep this in mind the next time you start telling me how bad your sales are doing as a result of the crummy fixed annuity rates. I’m only going to let you hold on to that crutch for so long.
Editor’s note: Sheryl S. Moore submitted this column before the tragic death of her son, A.J. Betts. His story, “Bullied to death” can be read on LifeHealthPro.com. Donations can be made to: “One Voice for A.J.” Fund, Valley Bank, 1290 Copper Creek Dr., Pleasant Hill, IA 50327.
For more from Sheryl J. Moore, see:
- Indexed annuity sales are down, not out
- How to choose a marketing organization
- Need an Rx for retirement? The doctor is in.