By Cyril Tuohy
Pacific Life has launched a new deferred income annuity the company says will help guarantee an income stream in the future.
The launch of Pacific Secure Income comes on the heels of gains in the deferred income category, and among fixed annuities generally, as market watchers expect interest rates to rise.
Christine Tucker, vice president of marketing for Pacific Life's Retirement Solutions Division, said Pacific Secure Income can help pay the cost of basic living expenses
"Clients want to build an active retirement — one in which they feel free to reinvent themselves as they pursue hobbies, interests and even new careers,” she said in a news release.
Deferred income annuity contract holders buy an annuity but don’t start receiving income payments until some point in the future. The longer an annuitant withholds collecting his or her payment, the higher the payments will be, not unlike Social Security where those who wait until the age of 67 receive more money than those who elect to begin collecting at 62.
The annuity industry sold $1.3 billion worth of deferred income annuities in the first six months of this year, a 43 percent increase over the $930 million sold in the first six months of 2013, according to LIMRA.
In the second quarter, the industry sold $710 million worth of deferred income annuities, an increase of 33 percent compared to the year-ago period, LIMRA reported.
Deferred income annuities make up a relatively small segment of the fixed annuity market, but with more people retiring and in search of a guaranteed income, they provide another option for investors in the market for a fixed annuity.
Pacific Life said the new deferred income product would fill a niche within its suite of fixed annuity products.
Clients can choose to buy the deferred income annuity with a single purchase payment, or through installments, and for a specified period, Pacific Life said.
Annuity contracts have often been criticized for being inflexible and expensive. But Pacific Life said its new product allows clients to take income sooner than originally planned, and also defer and receive income later than they planned.
For contract holders who die before receiving any income, or who die soon after income payments begin, reimbursement options for the entire purchase and the remaining income payments are also available, the company 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 protected].
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