Significantly more financial planners are recommending annuities, according to new research from Investment Trends.
A survey conducted by the firm with over 600 advisers at the end of 2014 found that 38% of them had recommended annuities in the previous 12 months, up from 32% in 2013 and 27% in 2012. In addition, 59% of advisers said they planned to use annuities in the future, up from 45% in the previous study.
The most popular provider of income guaranteed products in 2014 was Challenger, which was used by 86% of advisers who recommended annuities.
Of those who recommended annuities, the majority preferred long-term annuities (20%) and lifetime annuities (19%), with 17% using short-term annuities.
However, in the future Investment Trends believes usage of lifetime annuities will surge ahead of the other products, with 39% of advisers saying they planned to use them in 2015, compared to 31% who said they would use long-term annuities. Just 21% of advisers said they planned to use short-term annuities (less than 5 years) in the next twelve months.
59% of advisers said they planned to use annuities in the future
The researcher also reported strong support for deferred lifetime annuities (DLAs), which are not currently available in Australia.
83% of planners surveyed said they were open to using a DLA or similar product, if the Government removed current tax impediments. Where an adviser was already using annuities, this rose to 96%, which Investment Trends said demonstrated advisers are having a positive experience with these types of products.
Of the planners who would use DLAs if they are made available, 54% said liquidity access was a necessary feature, followed by 40% who nominated the availability of DLAs in superannuation.
“Planners continue to see a greater role for annuities as part of their retirement advice,” said Investment Trends Senior Analyst, Recep Peker.
“In recommending annuities, planners are responding to client concerns such as longevity risk. Healthy client interest will continue to buoy planner appetite for annuities in the current low interest environment.”
