Fixed-rate annuities sales are projected to soar as high as 35 percent over the next five years, with variable annuities sales hitting 15 percent, according to new research from LIMRA Secure Retirement Institute (LIMRA SRI)
The group predicts that while both income-focused annuity product sales and accumulation-focused annuity product sales will grow in the next five years, accumulation-focused annuity product sales will grow at a much faster pace.
In fact, LIMRA SRI predicts that accumulation-focused annuity products will grow 30 percent to 35 percent by 2023. On the income-focused annuity side, products offering deferred income are predicted to grow 10 percent to 15 percent, while immediate income product sales are predicted to grow15 percent to 20 percent by 2023.
With more than 10,000 Americans, the demand for retirement income products will expand to nearly $32 trillion in annuities sales by 2026, LIMRA SRI estimates
Favorable interest rates, a volatile stock market and product development will all also be drivers of strong annuity sales, said Todd Giesing, LIMRA SRI’s head of security research.
“Last year was a bounce back year for annuities,” Giesing said. “We saw all annuities product lines experience growth. Variable annuities experienced growth for the first time in six years, but it really was fixed annuities that were the main driver of growth.”
In fact, total fixed annuities had a record-breaking year in 2018, up 27 percent to $133.5 billion, LIMRA found.
Clients clamoring for stable returns and income are motivating the universe of financial advisors—even fee-only advisors who have never used an annuity in their careers—to look hard at new products.
“My interest stems from the newer, non-commission products in the space,” said Mark Wilson, founder and president of Mile Wealth Management in Irvine, Calif. “When you strip the big commissions and high internal fees out of fixed-income annuities and variable annuities, they can be an attractive option for clients who want stability.”
Multiyear guaranteed annuities (MYGAs) currently offering a fixed 3.8 percent payout in return for a four-year lock in are of particular interest to Wilson. “They look like a four-year CD paying 3.8 percent. I can’t get that anywhere else,” he said.