A number of insurance companies such as
The companies are selling deferred annuities that will later convert into income-annuities, which pay a pension-like stream of income in return for a lump-sum investment.
Income-annuities have been largely unpopular because of the availability of other sources for retirement income. In 2003, 17% of 401(k) plans offered an annuity as a distribution option, down from 31% in 1999, according to a study by business-consulting firm
But with a record number of Baby Boomers heading towards retirement uncertain of their sources of retirement income, insurance companies are hoping to capture income-annuity assets, or lump-sum investments.
Specifically, companies are selling deferred-annuities, which are tax-sheltered savings that allow a worker to set aside a certain amount of money for a predetermined period of time. The money from the deferred-annuity can later be turned into a stream of income.
Employers need to watch out for "gimmicks" intended to "sell commissions," says Rick Meigs, president of
MetLife's new deferred-annuity product, for instance, ensures that each investment made in the annuity from a worker's payroll is locked in at the latest interest rate at the time the investment is made. This way, workers can lock in different rates at different times without having to stick to one rate. MetLife does not levy surrender charges for this product. Prudential, too, is coming up with a similar product which is expected to launch next year, although the company hasn't decided if it will impose surrender charges, according to a company official.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
