Product news: Manulife offering annuities again

Manulife Financial Corp. has re-entered the annuities market in Canada after exiting in 2018 amid low interest rates and client demand.

Manulife said Monday that it’s reintroducing annuities to meet demand for stable income as more Canadians enter retirement with high living costs. The new products will provide guaranteed income for life or for a specified period, with annuity payments determined at the time of purchase through a lump-sum payment.

“There’s a great demand for fixed income solutions,” said Paul Savage, head of Manulife individual insurance for Canada, in an interview. “We’ve seen that in GICs and annuities, and based on that we think it’s the right time to re-enter the annuity market.”

Concerns about the cost of living and volatile markets, and fewer people with defined-benefit pensions, have all contributed to demand for guaranteed income products, Savage said.

Annuities sales have improved over the past year as higher rates made payouts more attractive to investors. The Bank of Canada raised its overnight interest rate from 0.25% in March 2022 to 5.0% this past July, where it’s remained since.

When Manulife exited the annuities market in June 2018, the Bank of Canada’s overnight rate was 1.25%. The insurer had become one of the largest providers of annuities in Canada following its acquisition of Montreal-based Standard Life Assurance Co. of Canada in 2015.

Savage cited low rates as well as low demand for the products 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 shot up with interest rates.

“A lot of people in the past hesitated to buy annuities because of the low bond yields,” she said. “But now is an excellent time, especially with a lot of people saying, ‘How long will bond yields stay as high?’”

Many investors expect rate cuts in the first half of next year.

Manulife is offering single life annuities, joint and survivor annuities, and term annuities that provide income for a specific period.

The new products offer a cash refund or principal protection guarantee. This means that if the annuitant dies prematurely, a beneficiary will receive a lump-sum payment equal to the difference between the principal investment and the total payments received.

There’s also an annuity settlement option, Savage said, where the lump-sum payment is transferred into a new life annuity contract and the beneficiary continues to receive payments based on the pricing of an annuity at the time.

BMO Insurance makes GIF changes

BMO Insurance is adding four products to its guaranteed investment funds (GIF) lineup, making popular ETFs available on its segregated fund platform.

The new investment options include the BMO Aggregate Bond Index ETF GIF, the BMO Canadian Income & Growth GIF, the BMO Global Income & Growth GIF and the BMO Global Innovators GIF.

The firm also said it’s reducing fees on more than 20 funds, and introducing a lower-cost fee-based option for its high-net-worth clients.