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February 02, 2015 at 07:00 PM
Boomers are good for annuities.
The annuities market experienced a good year for growth in 2014, despite interest rate headwinds, and 2015 shows signs of continued strength as boomers look for retirement income, issuers seek product innovations and 401(k) plans offer deferred-income annuities in target-date funds now that the U.S. Treasury Department has given them the thumbs-up.
In its “State of the Insured Retirement Industry” 2014 review and 2015 outlook, the Insured Retirement Institute said product issuers remain financially strong, while balance sheets are sound and post-2008 risk management efforts are yielding positive results.
Key trends for annuities coming out of 2014 into 2015 include modestly increasing sales, highlighted by a shift in product types. IRI reports that industrywide sales rose 4.3% in 2013 and appear on track for a similarly modest increase in 2014.
With neither year showing significant growth, the bright spot for sales should come from the shift into fixed products and away from variable annuities. Indexed annuities, single-premium immediate annuities (SPIAs) and deferred income annuities (DIAs) are the strongest contenders in the fixed market, according to IRI.
“As 2015 approaches, persistently low interest rates are a formidable headwind, but demographics and growing consumer awareness of the need to create an effective retirement plan that includes the use of guaranteed retirement income products and solutions continue to create a favorable market environment for annuities,” according to this year’s IRI report.
Clients Receptive to Annuities
IRI’s survey of advisors said three-quarters reported their clients are receptive to annuities, with 90% interested in guaranteed income in retirement. Overall, industrywide annuity sales are on track to rise 3% to 5% in 2014, IRI said. A year ago, IRI similarly predicted more product innovation and ongoing consumer demand for annuities, and reported that 44% of financial advisors planned to grow their annuity business in 2014.
Todd Giesing, senior analyst with LIMRA Secure Retirement Institute, said 1.5 million boomers are on track to retire every year between now and 2025, which is helping to drive growth in annuity sales as retirees and pre-retirees look to supplement pensions and Social Security.
