Insurers back away from "income for life" products
Guaranteed Minimum Withdrawal Benefit or GMWB plans were the first fail-safe retirement income products to hit the Canadian market. Soon, it seems, they'll be fewer of them.
GMWB plans are insurance products that work much like a very expensive mutual fund with a guaranteed withdrawal rate. Essentially, the insurance company guarantees you access to an income stream based on your original investment.
Desjardins Financial Security is the latest insurer to suspend sales of its guaranteed retirement income product. They likely won't be the last.
Desjardins follows in the footsteps of Standard Life which ditched its parallel product earlier this month. Transamerica was the first insurer to permanently exit the GMWB market, dropping its programs in February.
The insurance industry has struggled to keep up with the long haul commitments associated with these products, as interest rates have remained at historic lows and stock markets have simply proven too volatile.
At the same time, regulators have increased the amount of capital insurers must keep on their books, further limiting their ability to take on risk and driving down their stock prices as a result.
Have you purchased a GMWB product in the past? Were you satisfied? From where you sit, are the fees worth the protection?
By Gordon Powers, MSN Money