Variable annuities provide customers a guaranteed minimum income during retirement, and include an investment feature that has the potential to earn more money as financial markets rise.
These days, the average person in Europe and the United States can expect to spend almost a fifth of their lives in retirement. Demand for variable annuities is expected to grow significantly in the years ahead as more people, particularly in North America, Europe and Japan, live longer, healthier lives.
“For the first time we are offering a flexible retirement product that combines both the upward potential of an investment product with the security and guarantees you would usually associate with an insurance product,” says Jan Vooys, a committee member spearheading Aegon’s variable annuities in the Netherlands.
How does a variable annuity work?
Annuities are investment contracts that pay out regularly over either a person’s lifetime or over a fixed time period. With variable annuities, the pay-out is linked to the performance of a portfolio of investments, and usually comes with a minimum guarantee which is particularly popular with retirees.
With Aegon’s variable annuity in the Netherlands, Dutch customers will receive a guarantee of at least 7% on the initial premium for a period of fifteen years. If financial markets perform well, the product will pay out more, but the customer will not receive less than the minimum guarantee of 7%.
Strong growth expected
Over the past two decades, the market for variable annuities in the United States has been growing at an average of more than 15% a year. The product has also become very popular in Japan where over-65s already make up nearly a quarter of the total population.
According to a report by Swiss Re, if variable annuities prove as popular in Europe as they have in the United States and Japan, they could soon generate around USD 100 billion in premium income.
Strategy for variable annuities
Aegon’s ambition is to become a leader in the European variable annuities market, making the most of the knowledge in the United States and at the specially-created variable annuities hub in Ireland. Variable annuities will also be the main focus of Aegon’s new joint venture with the Japanese insurer Sony Life.
For more information on Aegon’s variable annuities in the Netherlands, please see www.aegon.nl (in Dutch only).
