The headline on a recent Bloomberg news story was eye-catching: “Low Rates May Be ‘Devastating’ to Annuities, Group Says.”
The article centered on a speech by LIMRA Chief Executive Officer Robert Kerzner at a Chicago conference in October. Kerzner minced no words while speaking in, appropriately, the Windy City about the headwinds our industry faces when interest rates are at near-record lows.
For example, at Aviva, we offer consumers an indexed annuity with the option of adding an income rider with an income base that grows at a guaranteed rate or an income base that grows at a lower guaranteed rate. The lower guaranteed rate, however, adds the interest credits from the base contract. Interest credits on the base contract are linked to the movement of a market index, and the accumulation value is guaranteed not to lose money because of market downturns.
Consumers also have more choices when it comes to how their income is distributed. At the time the consumer elects to trigger lifetime income benefits, he or she can choose a fixed amount of lifetime income benefits or — if inflation is a concern — a lower initial benefit with an inflation-linked increasing benefit amount.