Who is the typical buyer of
immediate annuities in the US? This is the question LIMRA, the
worldwide association of insurance and financial services
companies, set out to answer in a study of more than 55,000
immediate annuity contracts issued in 2008 and 2009.
Key findings of LIMRA’s study
were:
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- Women buy six of every 10
immediate annuity contracts; - The average age at purchase
for an immediate annuity is 73; - The average immediate
annuity premium was just over $107,000; - Seven out of 10 immediate
annuity buyers purchased lifetime guaranteed income contracts;
and - Nine out 10 lifetime income
annuity buyers chose payments guaranteed for a certain period or
provided a refund guarantee that enabled beneficiaries to recoup
some or all of remaining premium.
LIMRA retirement research
associate MD Matt Drinkwater said: “One of the biggest obstacles
for potential clients to buy an immediate annuity used to be fear
of losing control of their money. Our research shows it is not an
all or nothing decision. Two thirds of the contracts allow
annuitants to convert a portion of remaining payments to cash, if
necessary.”
However, LIMRA believes there
are product issues to be addressed. Among these are issues that
while many immediate annuity contracts offer the option to increase
payouts by a fixed amount or adjusted by inflation, only 7% of
contracts offer an automatic payment increase. LIMRA says the
demand for inflation-protected guaranteed payouts will grow in the
coming years with more retirees challenged to address this issue as
they live longer.
LIMRA projects that annual fixed immediate annuity sales
will increase to more than $12bn by 2014 compared with $7.5bn in
2009 and the all-time high of $7.9bn in 2008. Total US annuity
sales in 2009 were just under $239bn.
