It’s really the responsibility of the annuity industry to proactively spread information about annuity products. There is a lot of negative information in the public, some of it warranted, some of it not. Naysayers say that annuities cost too much, are complicated and lack flexibility if your needs change. This is not the case for most annuity products, but unless the annuity industry works to educate the public on annuity truths, they will continue to hear the negative people loudly. The National Association for Fixed Annuities’ President and CEO Kim O’Brien is calling for the fixed annuity industry to go on the offensive and distribute accurate annuity information to the public. This information comes from Insurance News Net’s “Fixed Annuities Must Tell A Simple Story,” by Cyril Tuohy.
Annuities offer value far beyond their current interest rate, so that is one of the first pieces of information that NAFA hopes to spread. They stress that full disclosure is crucial and certainly don’t want anyone to think that annuities are perfect and work right in every plan. The annuity industry simply wants consumers to consider annuity products and see what they have to offer and if they will be a useful product for their own financial plan. Back when defined benefit plans paid all workers lifetime monthly income, annuities were not well known. Now that most people don’t have this benefit at work and Baby Boomers are retiring in droves, annuity products that pay the same type of lifetime monthly income are more important than ever.
One of the first steps in spreading annuity education was the nonprofit organization, the Society for Annuity Facts & Education (SAFE), declaring last June Annuity Awareness Month. Many different financial organizations sponsored this annuity awareness campaign, including NAFA. There have been a lot of national annuity stories this year as well. The Treasury Department ruling regarding Qualified Longevity Annuity Contracts has increased talk about using annuities in retirement plans. State regulators have been working hard to ensure that advertisements are not misleading. Lawmakers have been talking about annuities related to the Security Throughout Retirement Act as well. Each time that annuities are discussed on the state or federal level, it brings awareness to their importance as a financial tool.
NAFA works to educate consumers and advisors, but they are also working more recently with experts as well. Sometimes people listen to an “expert” opinion without really looking any further into it. NAFA questioned one expert who said that no one should buy fixed annuities because of the current low interest rate environment. Annuities are not specifically designed to be interest-rate tools. Most people who own annuities have them for their retirement savings and principal protection. Fixed annuities protect your principal, guarantee income and provide you peace of mind during retirement. Interest rates should not always be the reason to buy a fixed annuity product. Higher fixed annuity rates are a bonus, but any interest received is in addition to the benefits for which you are already purchasing a fixed annuity most often.
O’Brien says that the story about fixed annuities must be kept simple. They don’t have all of the moving parts of variable or indexed annuities and their simplicity is one of their innate benefits. They are an insurance product meant to offer protection, specifically protection of your money and the risk that you will outlive it. Protection and guaranteed income are two of the financial guarantees in the most demand. Fixed annuity sales figures are at their highest level in five years. Second quarter sales were up more than 40% from last year. Fixed annuities offer many valuable benefits that have nothing to do with their earned interest. It’s important for the annuity industry to spread education that expresses the true benefits of annuity products.