Global Market Strategist Predicts Increase in Longevity Annuities in the U.S.

Annuity InvestmentA new report by Schroders, the global asset management firm, has found that longevity annuities should increase in prevalence thanks in part to recent rules and regulation changes, according to the industry news site insurancenewsnet.com.

The Department of Treasury created qualifying annuity longevity contracts (QLAC) in July of 2014 to help bolster retirement income strategies for what had been a relatively underutilized market. Lesley-Ann Morgan is the head of Schroders’ Global Strategic Solutions division and person in charge of putting together the report, entitled “Investment Perspectives: Global lessons in developing retirement solutions.”

“There are lots of variables in retirement; how long people will live for, the costs of goods and services they will need, interest rates available on their accumulated savings, and so on,” Morgan wrote in the reports summary. “Faced with this amount of long-term uncertainty, people tend to suffer behavioral biases and often make poor decisions. We believe that retirees need help about what constitutes a good quality retirement solution to help nudge them in the right direction.”

In an interview with InsuranceNewsNet, Morgan went on to say that longevity annuities can be used to meet the post-retirement needs of the mid-market, in addition to the needs of those with corporate retirement plans already. According to Morgan, this “packaged” solution would allow the individual to get outcome-based investing in the early years of retirement and a longevity annuity kicking in when they turn 80 or so.

The Schroders’ report goes into a great amount of detail on retirement income trends in the United States and other countries around the world. The U.K.-based National Employment Savings Trust (NEST), released a sort of blueprint for this new sort of approach this summer. Morgan believes it’s only a matter of time before it catches on in America.

The type of plan in question might sound a lot like a variable annuity to those in the industry, but Morgan believes there’s a difference as variable annuities, “can be quite complicated since there are so many options,” and the market requires “something more simple.”

Additionally, while many advisers and money managers can provide reliable services in outcome-based investing, the people in the mid-market generally can’t afford those services. The package they have in mind would be marketed to the “average man in the street.”

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