GLWBs Still Rock In The Retirement Set


Some industry watchers believe that guaranteed lifetime withdrawal benefits (GLWBs) will soon fall into disfavor in fixed index annuities (FIAs).

One reason they cite is that the stock market is at new highs, so that will divert consumer attention to investing. Another reason they cite is that the much-discussed curtailment of GLWB features will dampen curb appeal. For them, the Return of the Accumulation Society is close at hand if not already here.

According to data provided by Wink to InsuranceNewsNet, however, GLWBs still have plenty of fans.

In second quarter, GLWB election rates in FIAs rose to 63.1 percent from 59.2 percent in first quarter and 61.9 percent in fourth quarter last year, the data shows. (Election rate refers to the percentage of sales with GLWB elected when the feature is available.) The elections represent 58.3 percent of total second quarter sales, Wink research said.

It should be noted that the election rate has been higher. For instance, in fourth quarter 2012, it hit a then-three-year record of 68.6 percent for FIAs, according to Wink’s numbers. So, between then and now, a falloff has indeed occurred as stock market fortunes have improved. (The Dow today hovers around 17,110, well above the year-end 2012 close of 11,435.)

But the GLWB is by no means DOA. In all, 29 FIA companies offered a GLWB in second quarter. That was in 306 annuities. And the people who are electing it are the same ones who elected GLWBs in previous years: People at or near retirement who have retirement income streams on their minds.

For example, according to Wink’s numbers, the top age band for elections was 60–64. This group produced an average election rate of 23 percent. Next in line was the 65–69 age band, with a 20 percent average;, and then the 55–59 band with a 17 percent average. The numbers are based on data reported by 20 FIA carriers.

Buyers in the middle-age bands, running from 40 to 54, elected GLWBs too, but not at the same rate. Their average rates ranged from 2 percent to 10 percent, depending on age. No surprise there, since retirement is probably a long way off and accumulation potential is a more pressing concern for these consumers.

Surprisingly, some older seniors, ages 70 and up, elect the feature too. However, as may be expected, their average election rates fell with age, down to 0.01 percent at age 90+.

Seeing as the nation will not be running out of pre– and post-retirees in the foreseeable future, the GLWB future will likely not rest on whether there are buyers for the product. The data continue to show that the features are popular among older (though not elderly) buyers, even in an up stock market.

If there is any doubt about the feature’s future, it will have to do with whether carriers want to continue to offer GLWBs in their current form or some other variety. The scale-backs in design that have already occurred show that carriers have, and will, tweak for market conditions (especially interest rates), as fixed annuity carriers always do. But will FIA carriers just pull out of GLWBs? Really?

Perhaps new innovations will have even greater appeal among retirees. Perhaps another economic downturn will make FIA income guarantees too much for carriers to bear. Anything is possible. But based on the market today, the GLWB appears to be a fixture, at least for several years to come.


Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Connect with Linda →

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