Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Cyril Tuohy
Lincoln Financial Group, which has rapidly ascended the variable annuity (VA) league tables, has announced the launch of a new VA offering traditional and alternative asset investment classes.
The product, branded as Lincoln Investor Advantage and sold through advisors, is geared toward “tax efficiency,” the company also said. Investor Advantage was launched in response to surveys showing that investors underestimate the impact of taxes on retirement investing.
“Lincoln Investor Advantage delivers what advisors need — access to solutions that can help manage the growth and protection of client assets leading up to and through retirement,” Brian Kroll, senior vice present of annuity solutions with Lincoln Financial Group, said in a news release.
Lincoln is taking advantage of an opening in the market as traditional VA players pull back.
In the wake of the financial crisis, when interest rates dropped rapidly, many VA carriers lost money on annuities issued in previous years. Annuities issued before the financial crisis offered generous living benefits.
Traditional VA carriers like MetLife and Prudential began to trim back on VA sales.
Lincoln topped the $3 billion mark in VA new sales at the end of the first quarter, down slightly from the first quarter in 2013, according to Morningstar data. Even so, Lincoln rose to the No. 3 spot in new VA sales in the first quarter, up from the No. 5 spot in the first quarter of 2013.
Overall new sales of VAs in the first quarter dipped to $33 billion, down 3.7 percent from the year-ago quarter, and down 6.4 percent from the fourth quarter of 2013, according to Morningstar’s Annuity Research Center.
VA sales have suffered at the hands of fixed annuities over the past year as interest rates increased and the markets performed poorly. The Standard & Poor's 500 index returned only 1.2 percent in the first quarter.
In a conference call with analysts last year, Lincoln Financial’s chief executive officer Dennis Glass said the market for VAs remains strong as tens of millions of baby boomers move into retirement and search for ways to secure income.
As a result, Lincoln has had no problem raising prices and cutting back on benefits offered by VAs, Lincoln executives said.
Investor Advantage offers advisors access to 125 investment options, a lifetime income distribution feature and wealth transfer options, Lincoln Financial said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at email@example.com.
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