Just when you think that things cannot get any worse in the annuity market, they do. The 10-year Treasury, a driver of fixed and indexed annuity rates, began its descent from 4.61 percent in October 2007 to a miniscule 1.4 percent just over a month ago. What does this mean for indexed annuities? It means changes. Will these changes result in the death of indexed annuity sales? Let's see…
It might help if we first discussed the competitiveness of indexed annuity products. Let's start by comparing the typical indexed annuity from before the Treasury's decline to the standard product being offered today.
Today's annuities might not sound attractive compared to the products you were selling five years ago. After all, the typical indexed annuity's premium bonus is half of what it was back then. The GLWB rollup on that same product is 75 percent lower than back in 2007, and yet the rider charge on that same GLWB has more than doubled. Annual point-to-point (PTP) crediting method caps have declined by more than 3.5 percent since before the market's collapse, and you are being paid almost 1.25 percent less commission to try and make this sound like a fabulous deal. That's a tough sell, isn't it?