As the aging baby boomer generation continues its mass exit from the workforce in the form of retirement, employers are looking for solutions to meet employees financial needs, including the increasingly popular use of annuity products.
Rolled into qualified retirement plans such as a 401(k) or other defined contribution option, annuities offer retirees a guaranteed income stream, parceling out retirement distributions in set increments more akin to the defined benefit pension plans of old.
With baby boomers living longer than previous generations and average retirement savings plans proving inadequate, its easy for employers and their investment committees to see the benefit for plan participants when adding annuities. One industry expert says that benefit advisers should bring up this retirement income strategy with clients if they havent yet.
Theres a lot of talk about these kinds of products and there has been a lot of product development in this space, says Chris Lyon, founder and partner at Norwalk, Conn.-based Rocaton Investment Advisors, which offers independent investment consulting services to institutional investors.
In general, he says, advisers want to be bringing best practices and discussions of trends to employers and this is certainly an area where there has been a lot of movement over time, a lot of product development.
In particular, Lyon says, providers have been most successful rolling annuities into retirement plans for small to mid-size employers, but large employers are interested as well.
Its still a topic people want to hear about and learn about inside the large marketplace, but there are some hurdles the typical large plan has not overcome as yet, he says, including the regulation of their fiduciary responsibility.
Annuity sales boom
Annuity sales industry-wide are booming, according to the Insured Retirement Institute, which recently reported 2013 was the fixed annuity industrys best year since 2009.
For the full-year 2013 fixed annuity sales totaled $78.1 billion, a 16.6% increase from $67 billion in 2012, the Washington, D.C.-based organization says.
Variable annuities total sales were also on the rise during the fourth quarter of 2013, according to the independent investment resource company Morningstar Inc. Variable annuities total sales climbed to $35.8 billion, a 2% increase from $35.1 billion in the third quarter for 2013 and a 4.1% increase from $34.4 billion in fourth-quarter 2012, although full year variable annuity sales dipped 1.5% in 2013.
Still, for the full year of 2013, industry-wide sales of variable and fixed annuities increased 4.2% to $220.9 billion from $212 billion during 2012.
Supported by a resurgence in fixed annuity sales, industry-wide sales continue to move higher, says Cathy Weatherford, IRI president and CEO, adding its particularly noteworthy that income annuities continue to break new barriers, passing the $3 billion mark for the first time and reaching $3.5 billion.
The growing popularity of these products shows the expanding market of consumers looking for certainty through guaranteed lifetime income, she adds.
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