According to The Street article “Putnam CEO Wants Annuity Oversight Agency” by Joe Mont, Putnam Investments’ CEO would like an agency similar to the FDIC in charge of lifetime income products like annuities. Not only would he like the agency to oversee these investments, he would also like it to insure the products like the FDIC insures the money in banks. CEO Robert Reynolds even named the fictitious agency the Lifetime Income Security Agency and he is calling on Congress to adopt his idea. The agency would have the power to approve or deny all lifetime income products sold in the U.S.
It’s not that far-fetched of an idea, especially since the federal government, under President Obama’s lead, has been pushing Americans to secure their retirement with lifetime income products like the 401k annuity. As we live longer, many retirees are facing three or more decades of retirement in which they need income to sustain their lifestyles. He points out that overall sales of annuities have been relatively flat, partially because investors are wary to put so much money in one company whose guarantee lasts only as long as they are in business. While choosing a top company takes a lot of that risk away, Reynolds argues that government insurance would help bring many more investors to the lifetime income of products like annuities.
Unfortunately some investors are turned off from these excellent investments because of stories they have heard about a few bad companies selling products that were too good to be true and not following through on their promises. With a government agency overseeing those in the lifetime income business, only legitimate companies and good products would be approved. This could greatly increase the consumer trust level for products like annuities, draw-down funds, and guaranteed pay-out plans. Products like these, especially when they have death benefits, can carry Americans through a long lifetime without the worry of how they will pay their expenses in retirement.
