Annuity News

Annuities Suggested as Part of Pension Reform in China

China's pension system is in need of reform. The current pay-as-you-go system only covers 30 percent of the population and is funded by a 28 percent payroll tax on participating companies. The remainder of the system is unfunded with liabilities that total almost 140 percent of China's current GDP. Boston University Professor Laurence Kotlikoff provides an interesting set of remedies in a recent op-ed piece. Included in Kotlikoff's set recommendations is the notion of mandatory, state-...

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Number of Independent Financial Advisors Continues to Increase

The Wall Street Journal reports that there are increasing numbers of financial advisors leaving larger Wall Street firms to pursue careers as independent advisors: The number of financial advisors at major Wall Street firms fell 14 percent to 55,000 for the three years ending December 2008. The number of independent advisors increased 29 percent to 33,000 during the same period of time. The financial crisis had a clear impact on larger firms such as Merrill, Smith Barney and UBS. That said,...

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Financial Crisis

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Financial Crisis

S&P Index Ends Decade Off More than Ten Percent

The decade ending this past December 31 was difficult for most investors. One of the broadest equity indexes--the S&P 500--declined by more than 10 percent during the 10 year period that began on January 1 2000. After adjusting for inflation , the decrease during the previous decade was more than 30 percent. However, as discussed by New York Times columnist Ron Lieber, most investors did not begin the decade with a pot of money that remained static from the standpoint of inflows and...

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Inflation

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Inflation

Incremental Changes in the Variable Annuity Market

Much has been said about the impact of the financial crisis on variable annuity products and insurers. Wall Street Journal columnist Leslie Scism recently wrote about the first wave of variable annuity product redesigns to hit the post financial crisis market. Common themes include simplicity, cost efficiency and conservative benefit features. Scism provides some very good detail on the most recent wave of guaranteed living benefit features. Source: Wall Street Journal Full Story

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Annuity

Guaranteed Living Benefit

Variable Annuity

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Financial Crisis

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Annuity

Guaranteed Living Benefit

Variable Annuity

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Financial Crisis

Demand for Longevity Risk Picks-up with Lower Volatility

Demand for longevity risk has been returning to the UK pension market. High levels of volatility during the financial crisis deterred many players in the pension buyout market. The return to normalcy in the capital markets may, in fact, be contributing to under-pricing of longevity risk among those who are providing solutions to UK pension plan sponsors who seek to offload longevity-related liabilities. A worthwhile article in the Financial Times discusses the range of options that are...

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Target Date Funds Enhanced by Junk

It turns out that many target date funds are juiced by high yield or "junk" bonds. The issue is that target date funds (which presumably become more conservative over time as participants age) are riskier than what is generally perceived by consumers, regulators and financial advisors. This higher level of risk is consistent with the higher than expected volatility and losses experienced by many target date funds during the financial crisis. According to a recent Bloomberg article, up to 35...

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Doctor Shortage Could Become Worse with Health Reform

Residencies in the U.S. have been capped at 90,000 per year since 1997 as a result of Congressional attempts to deal with healthcare inflation . According to a recent Bloomberg article: Last year there were 16,721 fewer doctors than needed in inner city and rural areas. By 2025, the U.S. will face a shortfall of as much as 159,300 physicians. This existing physician supply issue will be stoked by health reform and the possibility of 31 million new patients entering the healthcare system with...

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Swiss Re First in Providing Longevity Insurance to a Public Pension Fund

The Reinsurer Swiss Re has provided the first public-private longevity transaction with a U.K.-based public sector pension fund . Swiss Re is essentially providing longevity insurance to 11,000 of the current pensioners under the Royal County of Berkshire Pension Fund. Swiss Re will assume the "floating" annuity payments and longevity risk for the 11,000 pensioners in exchange for an ongoing fixed premium. The Royal County of Berkshire retains control over the plan assets and the plan...

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Advanced Life Deferred Annuity

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Longevity Insurance

Swiss Re

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Advanced Life Deferred Annuity

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Longevity Insurance

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Healthcare Bills Contain Expensive New Long Term Care Entitlement

There is a new long term care entitlement in the current healthcare reform bills in both the House and Senate. The long term care provision is known as the Community Living Assistance Services and Supports Act ("Class Act"). The Class Act is projected to run a surplus during its first few years of existence, but will be in deficit within 10 years. This budget projection excludes the present value of the program's future liabilities--in other words, the type of accounting that any private...

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Annuities in 401k Plans Under Consideration by Obama Administration

Members of Congress and officials from the Departments of Treasury and Labor are working on options that would provide sources of guaranteed lifetime income to participants in 401k and other pension plans. At a high level, it is clear that the Obama Administration wants to create structures and incentives for: Increasing retirement savings. Providing people with the ability to turn those accumulated savings into streams of income that last through retirement. A trial program that would involve...

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Annuity

Annuitization

Compulsory Annuitization

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