Data & Research January 27, 2022

Total Annuity Sales Highest Since 2008

The Secure Retirement Institute says strong equity market growth in the fourth quarter and in 2021 helped to propel the growth.

Reported by

Total U.S. annuity sales were $254.8 billion in 2021, up 16% from 2020. This represents the highest annual annuity sales since 2008, and the third highest sales recorded in history, according to preliminary results from the Secure Retirement Institute (SRI)’s “U.S. Individual Annuity Sales Survey.”

Total annuity sales were $63.4 billion in the fourth quarter, 8% higher than the fourth quarter of 2020.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

“Strong equity market growth in the fourth quarter and in 2021 propelled double-digit growth in both traditional variable annuity and registered index-linked annuity sales, resulting in strong year-over-year results,” says Todd Giesing, SRI annuity research assistant vice president.

Total variable annuity (VA) sales were $32.3 billion in the fourth quarter, up 17% from prior year. In 2021, total VA sales were $125.6 billion, 27% higher than prior year.

Traditional VA sales were $21.7 billion in the fourth quarter, a 13% increase from fourth quarter 2020. For the year, traditional VA sales totaled $86.6 billion, up 16% from prior year. This ends nine years of declines for traditional VA sales.

“We have not seen traditional VA sales growth at this level in over a decade. Heightened concern about potential changes to the tax code drove growth in investment-focused, non-qualified product sales,” Giesings says. “In 2021, fee-based products experienced the largest gains as registered investment advisers and broker-dealers sought out tax-deferral solutions for their clients.”

Registered index-linked annuity (RILA) sales broke records in the fourth quarter and for the year. Fourth quarter RILA sales were $10.6 billion, 26% higher than the prior year. In 2021, RILA sales were $39 billion, 62% higher than the prior year.

“In 2021, RILA sales benefited from current economic conditions and expanded competition as new carriers enter the market,” Giesing says. “SRI predicts investors will continue to seek solutions that offer a balance of protection and growth—which these products offer—in 2022, continuing RILA sales’ upward trajectory.”

Total fixed annuity sales were $31.1 billion, level with fourth quarter 2020 results. For the year, total fixed annuities increased 7% to $129.2 billion.

Fixed indexed annuity (FIA) sales were $16.6 billion, an 18% increase from the fourth quarter of 2020. FIA sales were $63.7 billion in 2021, up 15% from prior year. This marks the largest annual growth for FIA products in three years.

“Improved interest rates and product innovation around cap rates helped address the pricing challenges FIA carriers faced early in 2021, making the products more attractive to investors,” Giesing says. “In addition, we see growing interest in accumulation-focused FIA products, as investors seek principal protection with greater investment growth to offset rising inflation.” 

Fixed-rate deferred annuity sales were $11.3 billion in the fourth quarter, an 18% drop from fourth quarter 2020 results. For the year, fixed-rate deferred sales totaled $53.4 billion, 2% higher than prior year.

“Today, short-duration fixed-rate deferred products offer, on average, three times the return of CDs, making them much more attractive to investors,” Giesing says. “As a result, fixed-rate deferred sales were at their highest level since the Great Recession, despite the low interest rate environment.”

Immediate income annuity sales were $1.6 billion in the fourth quarter, the same as fourth quarter 2020. For the year, immediate income annuity sales fell 5% to $6 billion.

Deferred income annuity sales increased 6% to $480 million in the fourth quarter. In 2021, total deferred income annuity sales were $1.9 billion, up 14% from prior year but well below the $2.5 billion in sales achieved in 2019.

“Despite improving interest rates, payout levels have not increased for income annuities in 2021,” Giesing says. “It is unlikely under current market conditions that this market will rebound to levels seen in 2018 and 2019.”

The Markets January 27, 2022

The Art of Building TDF Glide-Paths Amid Market Disruption

One of the key lessons to remember in multi-asset investing is that there is no free lunch, and those who benefit from taking the most risk are likely to feel the most pain when market conditions sour.

Reported by


Jake Gilliam, head of multi-asset solutions at Charles Schwab, recently sat down with PLANADVISER to discuss the resurgence of global market volatility—and the way providers of target-date fund (TDF) portfolios confront evolving market conditions.

“In terms of the return to volatility we have seen in early 2022, it has been a long time coming,” Gilliam says. “It is a reminder of why we, as long-term investors, must be strategic and thoughtful in our approach. We always have to remember that it is so difficult, if not impossible, to time the markets. Anyone who is trying to game the volatility and the short-term price swings is likely to get burned.”

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Gilliam says one of the obvious and lasting appeals of multi-asset-class portfolios, such as TDFs, is their potential to provide retirement plan participants with a smoother ride when markets are volatile. It is important to remember, though, that volatility cuts two ways. It is the main source of return as well as the main source of loss, and so it is necessary to embrace some degree of volatility.

“Exposure to volatility is not necessarily a bad thing,” Gilliam adds. “Volatility is simply a measure of the range of price changes—both up and down—an investment experiences over a period of time. The more stable the price, the lower the relative volatility, and vice versa.”

Considered as such, volatility is a measure of investment risk, because higher levels imply that a portfolio’s returns may be less predictable—yet taking that risk can enable the return necessary for long-term wealth accumulation.

“Simply put, with enhanced return on the upside comes the possibility for more rapid losses on the downside,” Gilliam says. “Our job as a portfolio manager is to strategically balance the risk and the reward, remembering that there is no free lunch in the marketplace. The real key to positive performance and to long-term success is to understand where you stand at any given moment, whatever the market is doing.”

Gilliam says the broader shifts occurring in the equity and fixed-income markets have resulted in some modest adjustments to Schwab’s TDF portfolios, noting that the potential for increasing interest rates has altered the landscape for fixed income and the role it plays in retirement portfolios.

“Combined with increasing inflation pressure, which had been largely absent for many market cycles, risks to long-term retirement success have emerged, which we intend to address with these adjustments,” Gilliam says.

Specifically, effective February 1, 2022, Schwab will be moderately increasing equity exposures by between 2% and 5% across the glide path. The firm is also adjusting allocations to real estate and inflation-protected bonds.

Gilliam notes that real estate assets tend to have a low correlation to other equity asset classes, providing additional diversification that may potentially help mitigate the impact of higher inflation over time. To gain these advantages, Schwab is increasing real estate exposure from 5% to 7% of the total equity allocation across the glide path. The resulting exposure ranges between 2% and 7% of the portfolios, with higher levels earlier in the glide path, Gilliam explains.

Prior to these changes, as the Schwab funds approached the target date, they typically had 3% to 5% less equity than peer averages—and significantly less than several top providers.

“With these changes, we expect to be more in line with the peer averages at the target date, but still notably more conservative than several top providers,” Gilliam says. “With this change, we maintain our strong risk management profile during the most critical period, as an investor shifts from accumulation to decumulation.”

On the equity side, allocations to the Schwab Core Equity Fund will be reduced, resulting in a range of a 4.8% starting allocation to a 1.3% final allocation, while allocations to several large cap equity funds will be increased, resulting in a large growth allocation range of a 12.3% starting allocation to a 3.7% final allocation.

“We take a long-term strategic approach to asset allocation and believe that picking market tops and bottoms is very difficult to do consistently,” Gilliam says. “With the 2022 changes, we are seeking to address longer-term factors that could impact successful retirement saving and investing. While capital market return expectations for equities are low relative to history, the equity risk premium compared to fixed income remains attractive.”

Additionally, Schwab’s investment leaders feel it is important to address evolving longer-term fixed income risks. They warn that investors may face the effects of low interest rates for an extended period and then confront the potential impact of eventual rising rates on retirement savings.

“We are seeking to help mitigate the negative impact to our investors throughout our glide path, but especially those near or in retirement,” Gilliam concludes.

«