Annuities to play a larger role in workplace retirement plans

Insurers expect guaranteed retirement income solutions to play a larger role in workplace retirement plans, especially through integration into managed accounts and target-date funds.

That was among the findings of Goldman Sachs Asset Management's latest Annuity Industry Survey.

The survey explores the key market forces shaping the annuity landscape, advances in investment strategy, and evolving distribution models that could transform the industry.

Among the key survey findings:

• Resilience in a risk-focused environment. Despite heightened concerns around a U.S. economic slowdown and market volatility, insurers remain focused on positioning their platforms for long-term growth. Insurers are increasingly looking beyond traditional U.S. equity exposures, with growing interest in international equities, emerging markets and private markets as they seek diversification amid an uncertain macroeconomic backdrop.

Platforms built with purpose. Insurers continue to evolve their investment platforms through fund innovation, lineup optimization and expanded index offerings. Although most survey respondents expect the number of asset manager relationships and investment option counts to remain stable or grow modestly, the data suggests a continued emphasis on building differentiated platforms that can support future product development and client demand.

Innovation beyond the core. While registered index-linked annuities remain the industry’s primary product focus, insurers are increasingly broadening their attention to solutions such as traditional guaranteed lifetime income variable annuities, fixed annuities and investment-only variable annuities. Product differentiation is also becoming more important, with insurers highlighting enhanced crediting structures, expanded index choice, and defined outcomes.

Turning interest into adoption. Artificial Intelligence has moved beyond a future concept and is becoming a practical tool across the annuity industry. Nearly all the insurers surveyed said they believe AI will play a role in helping investors better understand guaranteed income solutions, while firms are increasingly leveraging AI internally to improve sales efficiency, reduce operational costs and enhance client engagement.

Marci Green, head of retirement distribution and third-party insurance at Goldman Sachs Asset Management, told InsuranceNewsNet that the biggest takeaway for advisors is

“how valuable AI is going to be to overcome some of the hurdles of understanding the product features and benefits, and helping to provide more solutions and education to those advisors and their underlying policyholders.”

Insurers continue to see significant value in asset management partners, with more than 80% expecting to maintain or increase investment options and manager relationships.

As index offerings and sub-advised funds continue to gain traction, the survey suggests platform decisions increasingly favor asset managers that can pair distribution support, innovative product development, and differentiated investment capabilities to drive platform growth.

In-plan income: The decumulation pivot

In-plan retirement income has reached an operational tipping point, the survey showed.

As insurers position their businesses to capitalize on demand for growth potential while managing downside risk with guaranteed income solutions, the near-term opportunity remains heavily centered on RILAs. More than half of survey respondents (58%) said they believe RILAs will be the fastest-growing product by sales next year.

Insurer objectives

Insurers identify generating guaranteed income throughout retirement as the ultimate objective of retirement income strategies.

Retirees overwhelmingly prioritize guaranteed, consistent income, with 79% favoring some form of income guarantee over maximizing potential income. The findings also suggest that driving adoption will require making these solutions easier to access – particularly through defaults, better engagement tools, integration into managed accounts and advice platforms.

Green said the survey showed “that annuity manufacturers are placing a very significant focus on in-plan adoption and integration within the retirement world.

“Financial advisors are able to access the benefits of annuities within a broader financial planning framework within their employer system.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at susan.rupe@innfeedback.com.