Recently much have percolated in the news on living benefits, annuity flows, deferred income annuities and more. Here are some short takes.
Before starting lifetime income from fixed indexed annuities, policy owners who have a guaranteed lifetime withdrawal benefit rider in their contract take partial withdrawals less frequently than policyowners who do not have such a rider, according to a Ruark Consulting report. And those who do take partial withdrawals before starting lifetime income tend to take out less money than owners who have no such rider. Annuity professionals might expect that, since those owners will expect to take their guaranteed withdrawals in the future and might be disinclined to do so in the moment, so to speak. Like, who wants to wreck their guarantee?
The Ruark study blows that expectation to the wind, at least partially. It found that when policyholders did take partial withdraws before starting their lifetime income, the withdrawals were at “levels that are detrimental to the guarantee.” So apparently, when policyowners want or need the money, they’re going to withdraw the amount they want or need, regardless of the guarantee. Ruark said its staffers and its own fixed indexed annuity clients were “surprised at the limits of the rider’s effect on overall withdrawal behavior.” They’re not alone.
That’s the word from the Insurance & Retirement Services (I&RS), a business of the Depository Trust & Clearing Corp. (DTCC). In the first six months of 2013, more than $85 billion in annuity product transactions were cleared by DTCC’s National Securities Clearing Corp. That’s up from nearly $79 billion in the first half of last year, according to the I&RS Annuity Market Activity Report.
Deferred income annuity (DIA) sales in second quarter 2013 were up by almost 40 percent from first quarter, according to Jeremy Alexander, chief executive officer of Beacon Research. He speculates this is due to “continued demand for retirement income, larger payouts and new product introductions.” The marketplace is growing, too. For instance, in early September, Lincoln Financial Group launched its own DIA, the Lincoln Deferred Income Solutions, making for a total of nine DIA players that we know about. Cerulli tells us that six more carriers are fixing to jump in, too, so the DIA sales picture going forward could show more growth. At the very least, the market will see more competition. Last year, DIA sales reached an estimated $1 billion, according to Insured Retirement Institute.
For a while this summer, it seemed as if state regulators would have guidelines for regulating contingent deferred annuities (CDAs) in the works by now. But it turns out that the Life Insurance and Annuities (A) Committee of National Association of Insurance Commissioners, which has done much of the regulatory groundwork so far, still has decisions to make about next steps. The details are complicated, but the bottom line is some interested parties are at odds over certain proposals the committee has developed. Those parties have sent their concerns to the A Committee, so yet more deliberation is ahead. Some carriers are chomping at the bit, wanting to move forward with CDAs, so they are undoubtedly frustrated. But there you have it: CDA regulatory development has many twists and turns, so fast-tracking is not in the cards.
“You need to determine all the possible sources of income you can draw from.
Seventy-five percent of seniors and 60 percent of baby boomers say their financial health hasn’t changed since the recession, according to joint research by Aite Group and Chase Blueprint.
Researchers at the University of Missouri weren’t speaking about annuities when they pointed out the following, but annuity professionals might want to keep this in mind.