Despite Desire for Guarantees, Americans Keep Old Attitudes about Annuities
September 8, 2010 by N/A
September 08, 2010 | Business Wire
Allianz Survey Demonstrates Need to Dispel Myths and Educate on Product Innovations
MINNEAPOLIS–(BUSINESS WIRE)– Even after describing an annuity-like solution as their ideal financial vehicle, more than half (nearly 54 percent) of Americans aged 44-75 expressed distaste for the word “annuity”, according to a recent survey* from Allianz Life Insurance Company of North America (Allianz Life). An overwhelming 80 percent of the more than 3,200 surveyed preferred a product with four percent return and a guarantee against losing value over a product with eight percent return and subject to market risk, demonstrating the need for education about annuities and their place in retirement planning.
The study, titled Reclaiming the Future: Challenging Retirement Income Perceptions, also found that perceptions of annuities were not based on current information. Respondents’ apparent distaste for annuities comes from opinions formed decades ago. Fifty-three percent first formed their opinion of annuities 10-20 or more years ago, and 64 percent of those respondents haven’t researched annuities since that time. Thus, many myths and misconceptions continue to plague the products today. In fact, only 27 percent knew of innovations made with annuities during the past 5-10 years, and even fewer (23 percent) realize that variable annuities allow contract holders to participate in market gains.
“Our study demonstrates that more education is needed about annuities because perceptions need to change if consumers are to access guaranteed income and create a more stable retirement,” said Gary C. Bhojwani, president and CEO of Allianz Life. “The 401(k) industry did a great job of teaching consumers about mutual funds to save for retirement; now we need the same type of concerted education effort on annuities and how they can help Americans when they are in retirement.”
When people understand annuities, they’re very satisfied with them. According to the study, 76 percent of annuity owners are “very happy” with their purchase. More than half of owners like the product because it’s a safe, long-term investment vehicle (57 percent), a great way to supplement their retirement income (56 percent), and an effective tool to get tax-deferred growth potential (56 percent). In fact, consumers ranked annuities second-highest (50 percent) in satisfaction among all financial instruments, beating out mutual funds at 38 percent, stocks at 36 percent, U.S. savings bonds at 35 percent and CDs at 25 percent.
This data also shows that more Americans are now seeking safety and guarantees over growth. When asked what features they find most important in a financial product, the top feature was “the ability to create a stable, predictable standard of living throughout retirement” followed by the “ability to provide a guaranteed income stream for life.” Similarly, when asked to choose between putting money into an annuity-like solution (moderate growth opportunity, monthly income, but limited access to the lump sum) versus a similar instrument that provides total access but risks running out of money, 56 percent chose the annuity-like solution.
With respect to liquidity and access to funds – a common criticism of annuities – a majority of respondents (54 percent) chose a product with seven percent return and very limited access to funds over one that pays five percent but is totally accessible.
“The debate on retirement and the role annuities play in retirement planning needs to change,” Bhojwani said. “No other financial product offers guaranteed income for life. Government, financial planners and the industry need to re-educate the American public about what these products do and how they can help secure a stable retirement.”
About Allianz Life
Allianz Life Insurance Company of North America has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income goals with a variety of annuities and life insurance products. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with nearly 155,000 employees worldwide. Based on its revenue, Allianz SE is the 20th largest company in the world (Fortune Global 500, August 2009).
Larson Research and Strategy Consulting, Inc. and DSS Research fielded a nationwide online survey for Allianz Life among 3,257 U.S. adults, age 44 to 75. The margin of error for the total sample was approximately +/- 1.7%. The online survey was conducted in the United States between May 6th, 2010 and May 12th, 2010. In addition to a representative sample of 1,642 US households, subsamples of more affluent households and households who own annuities were also targeted. Results were weighted by age, gender, education, race/ethnicity and income to account for disproportionate sampling of certain populations.
Insurance and annuities are issued by Allianz Life Insurance Company of North America, and in New York, by Allianz Life Insurance Company of New York, New York, NY. Only Allianz Life Insurance Company of New York is authorized to offer insurance and annuities in the state of NY.
Allianz Life Insurance Company of North America
Laurie Bauer, 763-765-6174
Source: Allianz Life Insurance Company of North America