A July, 2011 Government Accountability Office (GAO) report highlights the role annuities can play in helping people secure enough income during retirement. The report is posted on the web at http://www.gao.gov/new.items/d11400.pdf. Further information on annuities is below.
FIXED AND VARIABLE ANNUITIES
There are many types of annuities. Among the most common are fixed and variable. Fixed annuities guarantee the principal and a minimum rate of interest. Generally, interest credited and payments made from a fixed annuity are based on rates declared by the company, which can change only yearly. In contrast, variable annuity account values and payments are based on the performance of a separate investment portfolio, thus their value may fluctuate daily.
There is a variety of fixed annuities and variable annuities. One type of fixed annuity, the equity indexed annuity, contains features of fixed and variable annuities. It provides a base return, just as other fixed annuities do, but its value is also based on the performance of a specified stock index. The return can go higher if the index rises. The 2010 Dodd-Frank Act included language keeping equity indexed annuities under state insurance regulation. Variable annuities are subject to both state insurance regulation and federal securities regulation. Fixed annuities are not considered securities and are only subject to state insurance regulation.
Annuities can be deferred or immediate. Deferred annuities generally accumulate assets over a long period of time, with withdrawals taken as a single sum or as an income payment beginning at retirement. Immediate annuities allow purchasers to convert a lump sum payment into a stream of income that begins right away. Annuities can be written on an individual or group basis.
Annuities can be used to fund structured settlements, arrangements in which an injury victim in a lawsuit receives compensation in a number of tax-free payments over time, rather than as a lump sum.
INDIVIDUAL ANNUITY CONSIDERATIONS, 2010-2014 (1)
PREMIUMS BY LINE
Measured by premiums written, annuities are the largest life/health product line, followed by life insurance and health insurance (also referred to in the industry as accident and health). Life insurance policies can be sold on an individual, or "ordinary," basis or to groups such as employees and associations. Accident and health insurance includes medical expense, disability income and long-term care. Other lines include credit life, which pays the balance of a loan if the borrower dies or becomes disabled, and industrial life, small policies whose premiums are generally collected by an agent on a weekly basis.
SALES OF INDIVIDUAL ANNUITIES BY DISTRIBUTION CHANNELS, 2010 AND 2014
DEFFERED ANNUITY ASSETS, 2005-2014
INDIVIDUAL IMMEDIATE ANNUITY SALES, 2010-2014 (1)
TOP 10 WRITERS OF GROUP ANNUITIES BY DIRECT PREMIUMS WRITTEN, 2014
TOP 10 WRITERS OF ANNUITIES BY DIRECT PREMIUMS WRITTEN, 2014 (1)