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Five Reasons Fixed Index Annuities Are In Demand


The fixed indexed annuity market has been strong over the past couple of years and experts don’t think that will change anytime soon. LifeHealthPro’s Peggy Bresnick explained why “Demand (is) growing for fixed indexed annuities.” Over the last year, fixed indexed annuity sales went up to $48 billion, an increase of 24%. That sales information came from the Insured Retirement Institute’s 2015 Fixed Index Annuity Distribution Trends report. The IRI surveyed 15 broker dealers and distributors across all third party channels to find out what changes are going on in the industry and how they are handling the continuous growth. Ten percent of annuity sales at broker dealers were made up of fixed indexed annuities last year, but most of those surveyed expect that number to grow this year. Not one respondent thought FIA sales would decline this year.

There are five main factors that the survey respondents expect to drive increasing fixed indexed annuity sales this year. The first is higher interest rates. Consumers are also flocking to indexed annuities because of the lifetime income benefits that they offer which are similar to variable annuity benefits. Another reason that FIA sales could rise this year is that consumers are worried that lifetime income benefits may not be as generous in the coming years as they are now. The fourth reason for the success of indexed annuities is their inherent principal protection that is coupled with the potential for upside gains. And finally, persistent low interest rates are keeping fixed indexed annuities popular.

When interest rates are persistently low, fixed indexed annuity products are a better alternative to CDs and other low interest rate products. They are also popular products when interest rates rise because they offer more growth potential as index options become less expensive. Protecting principal seems to be the most important factor to most consumers who choose indexed annuities. Guaranteed lifetime income is also a magnetic factor of FIAs because of current economic conditions. Survey participants said that around half of their fixed indexed annuities are sold with a lifetime income benefit.

Recent annuity innovations have included the option of providing guaranteed income to consumers because of that benefit’s increasing importance. Fixed Index annuities have followed this trend with their lifetime income benefit riders. Variable annuity products still account for around half of the sales in third party distribution channels, but fixed indexed annuity sales are growing fast. FIAs are popular with advisors and clients alike. Consumers like fixed indexed annuities because they offer principal protection, upside potential and guaranteed lifetime income benefits.

Written by Rachel Summit

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

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