Manulife Financial Corp. has re-entered the annuity market in Canada after being released in 2018 in the face of low interest rates and customer demand.
Manulife said Monday it is reintroducing annuities to meet demand for stable income as more Canadians retire with high costs of living. The new products will provide a guaranteed income for life or for a specified period, with the annuity payment determined at the time of purchase in the form of a lump sum payment.
“There is a lot of demand for fixed-income solutions,” Paul Savage, Manulife’s director of individual insurance in Canada, said in an interview. “We have seen this with GICs and annuities and on that basis we believe this is the right time to re-enter the annuity market.”
Savage said concerns about the cost of living, volatile markets and fewer people drawing defined benefit pensions had contributed to increased demand for guaranteed income products.
Annuity sales have improved over the past year as higher rates made payouts more attractive to investors. The Bank of Canada raised its overnight lending rate from 0.25% in March 2022 to 5.0% last July and remains at that level.
When Manulife exited the annuity market in June 2018, the Bank of Canada overnight rate was 1.25%. The insurer became one of the largest annuity providers in Canada after acquiring Canadian Standard Life Assurance Co. in 2015. based in Montreal.
Savage cited low rates as well as low demand for products as contributing to the decision to discontinue annuities at the time.
Lea Koiv, a tax, pension and retirement planning specialist in Toronto, also said demand for annuities has skyrocketed with interest rates.
“Many people have been hesitant to purchase annuities in the past because of the low bond yields,” she said. “But now is a great time, especially since many people are asking, ‘How long will bond yields stay this high?’”
Many investors expect interest rate cuts in the first half of next year.
Manulife offers single annuities, joint and survivor annuities, and term annuities that provide income for a specified period.
New products offer cash back or capital protection guarantees. This means that in the event of the annuitant’s premature death, the beneficiary will receive a lump sum amount equal to the difference between the amount of the principal investment and the total payments received.
Savage said there is also an annuity settlement option, in which the lump sum payment is rolled over to a new annuity contract and the beneficiary continues to receive payments based on the annuity price at the time.
BMO Insurance is making changes to the GIF format
BMO Insurance is adding four products to its guaranteed mutual funds (GIF) offering, making popular ETFs available on its segregated funds platform.
New investment options include GIF BMO Aggregate Bond Index ETF, BMO Canadian Income & Growth GIF, BMO Global Income & Growth GIF and BMO Global Innovators GIF.
The company also said it was cutting fees on more than 20 funds and introducing a cheaper fee-based option for its high-net-worth clients.
