No Time Left For Lip Service

As recently as a year ago, DSG was not seeing much developmental activity at all in the income product arena involving VAs. So, the above prediction represents a significant shift.

Not all companies are jumping on the income PPSS bandwagon, of course. But increasingly, when they do, the products include some innovative twists.

A recent example is the late fall debut by New York Life of a lifetime immediate annuity option (called "changing needs") that lets people increase or reduce their payout amount, even though the payment stream has begun. That's a lot different from the traditional immediate annuity structure, in which the payout is fixed at day one. It's targeting those who want enough flexibility in their income stream to be able to respond to changing financial needs–very much a boomer issue, according to industry surveys.

Not incidentally, this feature is coming from a carrier that, in 2004, reported a 154% increase in lifetime income annuity sales. That reflects a recurrent pattern: The income innovations are coming from carriers that are going after income planning PPSSs.

The sense of readiness can be seen in Congress, too. For instance, talk there is moving to action on whether employers can allow investment advice at the workplace in relation to pension plans. Section 601 of H.R. 2830 would allow financial services companies that manage such plans to provide this advice–something currently not allowed under ERISA.

Should this provision stick in any enacted legislation, this could be a door opener not just to employees receiving investment advice on their retirement plan but perhaps also income-related investment advice as they approach retirement.

I sure hope so because such advice is sorely needed. NU has carried numerous surveys indicating that not only are workers uninformed about retirement savings and retirement income arrangements but also that employers are not providing much help in these areas (other than offering the plan itself). Absent federal legislation and guideposts in this area, it's easy to see how the current state of affairs has arisen. Fortunately, and none too soon, efforts are in motion to turn this around.

All business people have a worst nightmare–some development that could derail their best-laid plans. Examples are recession, restrictive legislation or regulation, cataclysmic weather events, troubling public image, etc.

Even if the worst occurs, however, it won't stop the fact that boomers are about to start retiring–and start needing income plans and assistance. Rain or shine, this will happen. Firms that have not yet put this on their radar screens had better get busy, now.