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Deferred Annuities

Deferred annuities are designed for long-term accumulation and can provide income payments at some specified future date. A deferred annuity can be funded with either periodic payments, commonly called flexible premium deferred annuities (FPDAs), or funded with a single premium, in which case they’re called single premium deferred annuities, or SPDAs. While a deferred annuity has the potential of providing a guaranteed lifetime income at some point in the future, the current emphasis in a deferred annuity is on accumulating funds rather than liquidating funds. An advantage that deferred annuities have over many other long-term savings vehicles is that there are no taxes (tax-deferral) paid on the accumulated earnings in an annuity until withdrawals are made.

Table 2.1

Annuity Industry Total Sales
Deferred vs. Immediate Annuities
2000-2011 ($ billions)

YEAR

DEFERRED

IMMEDIATE

TOTAL

2000 181.1 8.8 189.9
2001 175.0 10.3 185.3
2002 208.6 11.3 219.9
2003 207.5 8.3 215.8
2004 209.2 11.6 220.8
2005 204.9 11.5 216.4
2006 226.3 12.4 238.7
2007 243.8 13.0 256.8
2008 250.6 14.4 265.0
2009 225.4 13.2 238.6
2010 201.9 13.5 221.3
2011 227.1 13.2 240.3

Source: Morningstar Inc. and LIMRA International, February, 2012;
Includes Structured Settlements reporting sales of $5.1 trillion, down 12 percent from $5.8 billion in 2010.


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