Filed Under:Life Insurance, Life Planning Strategies

Annuities Gaining Acceptance as Retirement Income Tool

Research from IRI, Cogent

Photo credit: Grant Cochrane
Photo credit: Grant Cochrane

New research from the Insured Retirement Institute (IRI) and Cogent Research shows that annuities are gaining greater acceptance among investors. In a recent poll, 73% of annuity owners and 17% of non-owners said that annuities are an important part of a retirement plan. That’s represents an increase from 55% and 8%, respectively, from 2011.

The survey also polled financial advisors, with 71% saying they have had a client seek an annuity purchase in the past 12 months. Among annuity producers, 84% said they are having more discussions with clients about retirement income planning today than five years earlier. Almost three-fourths said market volatility made it easier for them to sell annuities.

For the second consecutive year, guaranteed income topped the list of reasons why annuity buyers made their purchase, with 35% putting it number one, virtually unchanged from the previous year. Next up was an advisor recommendation, followed by tax-deferral features, principal protection and a guard against inflation. Tax deferral dipped a bit in importance, slipping from 23% in 2011 to 19% in 2012, while inflation protection grew in importance, rising from 1% of respondents last year to 6% in 2012.

For advisors, carrier financial stability was the top factor when recommending and selecting a variable annuity, followed by guaranteed income, sub-account options, principal protection and death benefits. The percentages were fairly consistent from this year and last. Advisors further reported that rollovers remain the largest source of funding for annuity purchases in 2012, with nearly 70% checking that option.

Other results of the survey include:

  • Among annuity owners, 63% somewhat or strongly agreed that market volatility made them more likely to consider an annuity purchase and 53% indicated they would like to know more about the features and benefits of their annuity investments.
  • Among non-annuity owners, 49% said they were concerned that annuity providers cannot meet their guaranteed obligations, and 29% admitted that the media had a negative impact on their perception of annuities. Only 5% of non-annuity owners said they were very or extremely knowledgeable about annuities.
  • Financial planners may need to learn more about the product as well, particularly the laws governing annuity sales. Eighty-four percent said they were either very or extremely familiar with annuities. However, only 45% said the same about annuity regulations.

“The current economic and market volatility has resulted in more conservative investors who are increasingly searching for investment vehicles, like annuities, that can provide market growth, guaranteed income benefits, and some level of principal protection,” Cogent Research managing director Anthony Ferreira said a statement detailing the survey. “The results indicate that while more investors and advisors are open to using annuities in a balanced portfolio, the industry must work harder to address lingering concerns regarding investor perceptions, firm stability, and overall commitment to providing future benefits.”

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