On Monday, Transamerica announced the launch of a new variable annuity with average annual fees that are roughly 70% lower than the industry average.
[Related: Interest in 401k Plan Annuities Rises as Result of Recent Volatility]
“Variable annuities allow consumers to invest on a tax-deferred basis as they work toward the goal of creating a steady stream of income during retirement,” Joe Boan, senior managing director of wholesale distribution and marketing of individual solutions for Transamerica, said in a statement.
The Transamerica Advisory Annuity has an average expense ratio of 0.52%, compared to 2.24% for the annuity industry overall. It features an investment menu of 26 portfolios managed by Vanguard or Dimensional Fund Advisors, including seven index portfolios. Investors have a choice of death benefits and can access policy value with no surrender charges.
Boan acknowledged the impact that COVID-19 and efforts to slow its spread have had on investor confidence.
“We recognize that many Americans are focused on financial security right now. Variable annuities can be an excellent vehicle for helping to create future retirement security, as a complement to or substitute for other retirement savings accounts,” he added.
Section 204 of the SECURE Act created a safe harbor for 401(k) plan sponsors who offer annuities in their plans, protecting sponsors from lawsuits filed by participants if an annuity provider were to go out of business.
However, a report published earlier in April found that although defined contribution participants have an appetite for annuities, they may be lacking in education about them.
Allianz Life found that although 59% of plan participants would consider an annuity as a lifetime income option in their employer-sponsored retirement plan, 60% are not sure about the benefits to annuities. They study found 61% of participants are looking for more information about annuities.
Danielle Andrus works as an editor for The Financial Planning Association® (FPA®). Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits Selling, Senior Market Advisor, Boomer Market Advisor, and Bank Advisor.
