Fee-based variable annuity sales hit $1.2 billion in the third quarter, up 44% from 2020, according to the Secure Retirement Institute (SRI). In the first nine months of 2021, $3.6 billion poured into fee-based variable annuities, which is 60% higher than last year. This marks the first time that sales of these products reached more than $1 billion for four consecutive quarters, said the industry-funded think tank.
“The growth in fee-based VA sales was driven by registered investment advisors and broker-dealers,” said Todd Giesing, assistant vice president and director of annuity research at SRI. “We believe increased interest in tax deferral, coupled with technology solutions aiding operational challenges, are playing a role in the rise of VA fee-based products.”
Total variable annuity sales hit $30.6 billion in the third quarter, a 28% increase from 2020. A whopping $93.3 billion poured into VAs in the first three quarters of 2021, 31% higher than last year.
VAs drove about half of the uptick in total U.S. annuity sales, which hit $62.3 billion in the third quarter, up 12% from the same period in 2020. Annuity sales have increased 19% so far this year to $191.4 billion, according to SRI.
Jackson National Life, Equitable Financial, Lincoln Financial Group, Brighthouse Financial and Nationwide led the market in variable sales, SRI found.
Also noteworthy, not all annuity sales were rollovers from retirement plans or IRAs, SRI said.
“Interestingly, nearly half of all retail annuity sales (49%) used nonqualified assets,” Giesing said. “Generally, nonqualified annuity sales have held about 42% of the retail market in the past 10 years. We are seeing significant increases in nonqualified sales through all deferred annuity product lines, a key indication that tax deferral is a significant driver of growth in 2021.”
Traditional VA sales were $21.4 billion in the third quarter, a 21% increase from the third quarter of 2020. Year to date, traditional VA sales have totaled $64.9 billion, up 17% from the previous year. By year’s end, SRI is projecting that traditional annuities will surpass expectations, with nearly 20% in growth.
Registered index-linked annuity (RILA) sales were $9.2 billion, up 47% from the third quarter of 2020. For the first three quarters of 2021, RILA sales were $28.4 billion; 81% higher than they were in the previous year.
“Over the past five years, RILA sales have jumped tenfold, driven by market conditions, new carriers entering the market and expanded distribution,” Giesing said. “As investors continue to seek investment growth with a layer of protection, we expect this trajectory to continue.” SRI projects sales to exceed forecast expectations, with 2021 sales exceeding $36 billion.