Old age is not always kind... and neither are creditors. By themselves, these two realities of life represent the main financial risks faced by all retirees. Most Canadians require some income that is guaranteed for life, and annuities are a convenient way of insuring they don’t outlive their income, says Saundra Edwards, assistant vice-president of product development for Canada Life, Great-West Life, and London Life.

If the wave of baby boomers has not yet translated into annuity sales, she believes it will do so before long. While annuities do not constitute a large part of the insurers’ business, Ms. Edwards says that they do represent a growing part of their retirement product line-up.

In her opinion, the market should focus on specific segments of older people. “Those who are most risk-averse should have more annuity income, as should low-income households who require more security,” she says.

In some ways, Ms. Edwards says that annuities have been forgotten. Guaranteed withdrawal benefits stole the show in recent years, and there has not been much innovation in annuities. However, she points out that an annuity can provide a significant fixed monthly income. Based on her calculations, a $100,000 annuity could generate a monthly income of $535 for a 65-year old-man and $470 for a woman of the same age. Those numbers increase for someone aged 75, generating annuity income of $700 per month for the man and $600 for the woman.

In an interview with The Insurance and Investment Journal, Ms. Edwards shared some of the statistics that could pave the way for a revival of annuities

• Statistics Canada data suggests that only one in four Canadian workers have access to a defined benefit pension plan (Source: Pension Plans in Canada and Labour Force Survey, April 2009)
• The average retirement age was age 62 in 2010 (Source: StatsCan census data; StatsCan Labour Force Survey estimates
• 55-74 year olds control 1 trillion dollars today, and by 2020 that amount will increase to 2 trillion (Source: Investor Economics)
• The average debt of those aged 55-64 stands at $120,000 (Source: Investor Economics
• Those aged 65 to74 will receive a total of 116,000 inheritances, and the average amount will be $459,000 (Source: Investor Economics
• Over the course of the next decade, more than 6 million Canadian households will retire (Source: Investor Economics
• Ten years from now, $7 out of every $10 will be held be pre-retirees or retirees (Source: Investor Economics)