Annuities have their lovers and haters, but QLACs seem to bridge the divide.
While qualifying longevity annuity contracts are still in their infancy as a retirement product, the Insured Retirement Institute reports strong interest from advisors and the public in 2015, something they say will continue in the years ahead.
The organization released its annual “State of the Insured Retirement Industry” earlier in December. It found that as 2016 approaches, several macroeconomic factors are in play. The DOL’s forthcoming fiduciary rule looms large, potentially requiring new product designs and disrupting current distribution models.
On the other hand, demographics remain favorable as the population continues to age and consumers continue to become more cognizant of the extent to which they are responsible for generating their own income in retirement. This is a positive demand factor that should continue to create favorable business conditions and spur continued innovation in product design, helping to offset some of headwinds.
The organization finds that:
- Financially stable annuity providers with strong liquidity and sound balance sheets continue to supply lifetime income solutions to the marketplace.
- Ongoing product innovation is creating a wide array of consumer choice in lifetime income strategies, as annuity providers diversify and expand their offerings to better manage risk and tailor their products to meet various consumer needs.
- Though in its infancy, the number of QLACs greatly expanded during 2015, reflecting the opportunity created by the Treasury department via its QLAC rule to enable consumers to more seamlessly direct retirement assets into lifetime income solutions.
- Investment-Oriented Variable Annuities (IOVAs), while still a small portion of the overall VA market, have grown over 90% in sales in the past five years, reflecting growing interest in the tax deferral and outcome oriented investment strategies offered in these products.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
