How Competitive Are Income Annuity Providers Over Time?

13 Pages Posted: 20 Apr 2021 Last revised: 24 Apr 2021

See all articles by David Blanchett

David Blanchett

Morningstar Investment Management

Michael S. Finke

The American College

Branislav Nikolic

York University - Department of Mathematics and Statistics

Date Written: April 19, 2021

Abstract

The 2019 SECURE Act provides safe harbor protections to employers who evaluate the costs of providing guaranteed income including gathering information on competing providers. Annuities can be more difficult to evaluate than mutual funds because annuity expenses can be opaque, financial strength matters, and insurer competitiveness can change over time. We find significant variation in the payout rates across providers over time. While the payout rankings of annuity companies (e.g., best to worst) are fairly sticky over the short-term, over the full period of the analysis the correlation declines effectively to zero (versus the initial rankings). This suggests individuals or institutions who choose a single annuity provider based on income payout should revisit the decision regularly to ensure the quotes are still competitive. Companies for which immediate annuities are a higher fraction of total sales tend to rank higher and remain so more persistently over time.

Keywords: Retirement, Retirement Policy, Annuities, Insurance Companies

JEL Classification: J26, J32, G22

Suggested Citation

Blanchett, David and Finke, Michael S. and Nikolic, Branislav, How Competitive Are Income Annuity Providers Over Time? (April 19, 2021). Available at SSRN: https://ssrn.com/abstract=3829970 or http://dx.doi.org/10.2139/ssrn.3829970

David Blanchett

Morningstar Investment Management ( email )

22 W Washington
Chicago, IL 60602
United States
859-492-5637 (Phone)

HOME PAGE: http://www.davidmblanchett.com

Michael S. Finke (Contact Author)

The American College ( email )

Bryn Mawr, PA 19010
United States

Branislav Nikolic

York University - Department of Mathematics and Statistics ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
United States

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