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IRI Industry Predictions: Fixed Index Annuity Sales & 3% Interest Rates


The Insured Retirement Institute released their State of the Industry report last month.  The report offers insight into the overall annuity market for 2015 as well as a prediction that interest rates will rise above 3% this year.  In Think Advisor’s article, “Fixed Index Annuities to Hold ‘Bright Spot’ in 2015,” Melanie Waddell says that annuity purchases will continue to shift to products that offer principal protection and income streams for the future.  The IRI believes that an increase in interest rates later in the year will lead to significant innovations and focus on variable annuities once again.  But as of now, fixed indexed annuities will remain a focus in the annuity industry.  Baby Boomers are facing their retirement realities head on and are searching for principal and income guarantees.

Growth has been strong for fixed indexed annuities, immediate annuities and deferred income annuities.  Part of this growth can be attributed to public policy changes, especially when it comes to DIAs.  Indexed annuities have their own reasons for growth in the past couple of years.  Their principal protection paired with growth potential make fixed indexed annuities an important solution for the accumulation phase of retirement planning.  Many people have been using them as an alternative to CDs in their planning.  The income stream that you receive from fixed indexed annuities is both reliable and efficient and some experts tout these annuities as being the closest product to recession-proof that you can get.  Indexed annuities offer a guaranteed minimum surrender value throughout the contract and defer taxes on interest earned until you start receiving withdrawals.

The IRI’s president and CEO says that there is a huge opportunity for the insured retirement industry to innovate and meet the changing demands of Americans who are facing retirement income challenges.  There was not significant growth in the industry during 2013 and 2014, as sales shifted from variable annuities into other annuity product types.  Fixed annuity sales increased significantly from 2013 to 2014, while variable annuity sales were pretty flat.  Variable annuity assets did reach an all time high during the 3rd quarter of last year though.  Overall annuity sales are expected to increase 3-5% for 2014 as a whole though.  Deferred income annuity sales are likely to continue their significant increase during 2015, especially because of recent Treasury Department rulings and an increase in companies selling the products.  There are a few more annuity regulations to watch in the coming year that could affect annuity sales and trends as well.  The Department of Labor and the Treasury Department are both working on the finalization of new policy details.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+

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