Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Linda Koco
Advisor searches for income annuity payout information galloped ahead in 2013, rising by more than 15 percent from the previous year.
The numbers come from analysis of figures provided by CANNEX USA, a database that annuity advisors use to obtain payout and related policy information for clients who are interested in buying a single premium immediate annuity (SPIA).
In 2013, CANNEX recorded more than a half million (559,800) “surveys.” These are advisor inquiries or hits to the firm’s online database.
The numbers are up by roughly 15.3 percent from the year before and up by 35.7 percent from 2011, the year when CANNEX first started publishing survey activity. CANNEX includes data on products of multiple insurers in its database but does not sell SPIA policies.
The figures seem to correlate with the substantial increase in income annuity sales that the annuity industry saw last year. In the first nine months, those sales jumped nearly 11 percent and set a new record totaling over $7.5 billion, according to Beacon Research.
More interest in later income start dates
Another increase that the CANNEX report picked up is a whopping 211 percent jump in inquiries involving SPIAs with an income start date beginning sometime after the first 365 days of policy ownership.
In 2013, the CANNEX system recorded nearly 60,300 such inquiries, representing nearly 10.8 percent of all surveys for the year. That is more than three times the number of such inquires in the two previous years. In 2012, the after-365-days tally came to just 19,411 hits and represented only 4.9 percent of total surveys for the year. In 2011, the total came to 20,300 hits and represented 4 percent of all surveys that year.
The huge jump in 2013 in the after-365-days segment likely correlates with the growth in deferred income annuity (DIA) products and sales, Gary Baker, CANNEX president, said in an interview.
DIAs are relative newcomers to the fixed annuity market; their most distinguishing feature is that they don’t start the payout phase until several years after policy purchase. Sales for the products were on a tear last year, increasing more than three-fold in third quarter alone, compared to the same period in 2012, according to figures provided by Beacon.
CANNEX currently combines DIA data with SPIA data, because DIAs are a form of SPIA. However, so many new DIAs have come out that inquiries concerning them are rising, Baker said.
If the interest continues, the day may come when CANNEX will provide separate numbers on DIA and SPIA inquiries, he said. That may help the industry see which age groups advisors are targeting for which type of income product.
“From what I hear from the annuity carriers, the DIAs are attracting younger buyers, in their mid to late 50s,” said Baker.
By comparison, the traditional SPIA products are attracting older buyers, according to age data provided by CANNEX. Over the last three years, most inquiries to the company’s database were for people aged 60 to 75, with the top age segment being people ages 60 to 65. As the table shows, this age group has represented the largest segment of inquiries — 24 percent — for all three years.
Regarding the increase in total hits to the database, Baker pointed out that a couple of large accounts entered the CANNEX system last year. That probably accounted for some of the uptick, he said.
Another factor, he said, is that financial planners are increasingly using SPIAs in financial planning. “Also, in advisor accreditation programs, SPIAs have become a systemic and accepted part of the formal training and education programs that deal with creating portfolios for retirement income.” This increased awareness and knowledge has likely heightened advisor interest checking out payout products for clients.
Yet another factor has to do with marketplace changes. Some carriers are bringing out new types of products to meet retirement income needs, Baker said. Some are looking more seriously at indexed annuities, for example, and at new types of guarantees.
“If it’s a variable annuity company, say, offering SPIAs helps diversify what the company has to offer, and also balances out what they have on the variable side,” he said. Advisors pick up on the availability and start searching out the SPIAs on the database.
Note: The CANNEX report only shows SPIA surveys paid for by distribution companies and run by advisors or the annuity desk of a distributor, provided the surveys are associated with a potential sale. Searches run by marketers, researchers and the curious are excluded.
Linda Koco, MBA, is a contributing editor to AnnuityNews, specializing in life insurance, annuities and income planning. Linda may be reached at email@example.com.
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