Caution Sign - Higher Interest Rates AheadBy Richard Stolz – EmployeeBenefitAdviser – June 6, 2018

Rising yields have helped boost payout rates on annuities, says Insured Retirement Institute vice president Frank O’Connor. “Rising interest rates essentially increase the minimum guaranteed lifetime withdrawal benefit,” he explained. Pricing on all annuities is positively impacted by rising interest rates: issuers are able to share with contract holders the benefits of higher-yielding bonds in the portfolios that fund fixed indexed annuities, and guaranteed lifetime withdrawal benefit contracts.

 

Annuity Sales Slipping

Annuity Sales Slipping chart

Another factor that augurs well for annuity sales is demographics. “The number of Baby Boomers moving into retirement with large account balances in defined contribution plans is large and growing,” observes O’Connor.

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