The effect of the PPA rules regarding combination annuity/Q-LTC products is to clarify that inside buildup of deferred annuities
may be paid tax-free as qualified LTC insurance, Adney said.
However, I believe the behavioral reasons cited above will continue to keep immediate annuity sales and annuitization of existing deferred annuities
Spencer said deferred annuities
had grown "phenomenally" in the last decade and now were coming under regulatory scrutiny.
Variable deferred annuities
were quite straightforward when they started to make a splash in the financial markets back in the latter part of the 1980s.
Concern developed that deferred annuities
were being used more as short-term tax shelters than as the retirement vehicles the federal government intended them to be.
It has become virtually accepted wisdom for many, despite the facts that: (a) it ignores the huge differences that exist between immediate and deferred annuities
and between the fixed and variable varieties of the latter; and (b) the arguments most commonly made in its support are grievously and obviously flawed.
Swanson filed the Minnesota suit in connection with allegations that Allianz Life had sold deferred annuities
to Minnesota senior citizens without first determining whether the annuities were suitable investments for the seniors.
Such contracts were defined as individual deferred annuities
, the underlying assets of which are held in the general account and the values of which are subject to an MVA unless held for guarantee periods that are specified in the contract.
Many proponents of deferred annuities
point to tax-deferral as a great advantage of these instruments.
* A 73-year old widow puts most of her $75,000 savings into deferred annuities
. When she needs to pay for urgent dental work and home repairs, she is unable to access these funds or annuitize the contracts without significant surrender charges.
Sales of fixed rate deferred annuities
also plummeted in the fourth quarter to $5.9 billion from $7.4 billion, a 20 percent dip.
One is the growing trend to impose heightened "suitability" requirements before deferred annuities
can be sold to senior citizens--to protect the seniors.