The research by Cerulli found that deferred variable
annuities represent the largest portion of annuity sales,
accounting for 68% of industry sales as of second quarter
2006, according to a
. While variable annuities have shown rapid growth, fixed
income annuity sales showed relatively little change, from
4% in 2001 to 11% in second quarter 2006.
The study showed that more than half of annuity assets (55%) and annuity sales (55%) are attributable to qualified arrangements as of second quarter 2006, the highest levels seen in more than 10 years. These qualified arrangements consist of individual retirement accounts (representing approximately 67% of total assets), 403(b) plans (25%) and small amounts in 401(k), Keogh, and deferred compensation plans.
Despite anticipated growth, Cerulli points out that one challenge to the growth of annuity sales is that less than one-quarter of both fixed and variable annuity sales come from money that is new to the industry.
The Cerulli report also found that:
- Advisers place greater importance on principal protection than retirement income when choosing an annuity for their clients, as 79% and 70% selected these factors, respectively, in 2006.
- Principal protection and retirement income were closer among fee-based advisers, at 70% and 66%, respectively, while commission-based advisers prefer systematic withdrawals to guaranteed withdrawals when recommending a decumulation option from a variable annuity.
- Commission-based advisers were more likely (26%) to recommend variable annuities than fee-based advisers (9%).
- Nearly half (48%) of fee-based advisers will not consider annuities for qualified rollovers versus 19% of commission-based advisers.
- 82% of advisers frequently or occasionally recommended in 2006 that variable annuity clients make systematic withdrawals to guarantee retirement income.