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Income Annuity Buyers Shift Toward Deferred Products: Cannex

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What You Need to Know

  • An income annuity converts a lump sum into a regular stream of income payments.
  • The percentage of income annuity buyers choosing deferred benefits stream start dates increased sharply for the second straight year.
  • More income annuity buyers are buying contracts that insure income for just one spouse.

Cannex Financial Exchanges Ltd. says the mix of income annuities sold changed dramatically between the second quarter of 2020 and the second quarter of this year.

The percentage of annuities sold with income streams starting 13 or more months in the future soared to 39% in the latest quarter. That was up  from 33% in the second quarter of 2020, and up from 26% in the second quarter of 2019.

In the latest quarter, the average purchaser of a deferred income annuity set the benefits stream to start 7.8 years in the future, or around age 67.

The family situations involved also changed dramatically.

The percentage of income annuity purchasers who were protecting income for just one life, rather than two lives, increased to 67% in the latest quarter, from 60% in the year-earlier quarter. The percentage who were protecting income for two lives fell to 23%, from 27%. Other income annuity purchasers insured income for a specified, guaranteed period of time.

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What the Numbers Mean

Typical consumers buying immediate annuities in the second quarter were 69 and paying an average of $342,582 in premiums. Typical consumers buying deferred income annuities were 59 and paying $214,041.

The shift toward deferred income annuities and single-life annuities may be a sign of COVID-19 pandemic-related layoffs, low interest rates, annuity menu changes and other forms of economic pressure pushing involuntary retirees to do their best to convert 401(k) and IRA assets into adequate post-retirement income.

Survey Basics

Cannex put those figures in its Cannex Survey Experience reports for the U.S. income annuity market for the second quarter of 2021 An income annuity is a contract that converts one large premium payment, or “lump sum,” into a regular stream of income payments.

Cannex creates many streams of data on products, prices and transactions in the financial services markets in Canada and the United States.

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