By Lewis von Herrmann
In its latest national Survey of Charitable Gift Annuities, the American Council on Gift Annuities (ACGA) explores the effect the Great Recession and the ongoing economic recovery have had on gift annuities.
About the ACGA Survey.
Those who manage many types of split-interest gifts, including charitable remainder trusts, lead trusts, and pooled income funds, are required to file annual tax returns with the IRS. These returns are then studied by the IRS Statistics of Income group and are reported upon annually. On the other hand, the IRS does not collect statistics about charitable gift annuities since they are completed gifts subject to income payments.
Fortunately, the American Council on Gift Annuities (ACGA) periodically undertakes a national survey of organizations with active charitable gift annuity programs. With surveys completed every four or five years since 1994, the ACGA has amassed a very helpful repository of data about gift annuities over the past 20 years.
The ACGA released the results of its most recent survey in April at the 31st annual ACGA conference in Baltimore. The 2013 survey is now the only source of information about charitable gift annuity practices, policies and trends.
Background information on charitable gift annuities.
Charitable gift annuities are a time-tested arrangement whereby a donor makes a gift to a qualified charity in exchange for payments for life. These contracts have increased in popularity over the past 150 years and are offered by thousands of charitable organizations. American Bible Society has the oldest ongoing gift annuity program in the United States and has issued tens of thousands of charitable annuities continuously since 1843.
Survey highlights: Residuum percentages.
According to the latest survey, the average residuum (remainder) for annuities that terminated as a result of the annuitant’s death over the past five years was 64 percent of the initial contribution. As may have been expected given investment market conditions during the period in question, this figure is lower than the 82 percent residuum reported in the 2009 survey covering the previous five years. The latest survey includes gift annuities that terminated between 2009 and 2013, and the termination of many of these annuities coincided with the depths of the stock market lows experienced in 2009 and 2010. Annuities that have terminated since the market recovery will likely yield a residuum closer to the norms of prior surveys.
Annualized returns.
The rise in stock market values has helped raise the annualized returns of gift annuity assets as well. The mean annualized return for the last fiscal year was 9 percent, closer to the mean return of 8 percent for the last 10 years. Some 37 percent of respondents reported a return in the range of 10 to 20 percent for the last fiscal year, while only 19 percent of respondents saw that level of return over the past four years.
ACGA rate adoption.
Almost all responding charities, 96 percent, reported that they usually or always follow ACGA rates. Since the inception of the ACGA survey in 1994, the percentage of respondents who follow the ACGA’s recommended rates has never fallen below 95 percent.
Contracts issued and face value.
The reported average number of contracts issued per year was 16.4. Of those, 70 percent were one-life annuities while 30 percent were issued for two lives. While most CGAs were of the immediate payment variety, 12 percent were deferred payment annuity contracts, an all-time record. Some 66 percent of gift annuities had a reported value of $500,000 or less, compared with 73 percent in 2009, indicating a trend toward larger funding amounts.
About gift annuitants.
Women accounted for 57 percent of gift annuitants, while men made up the remaining 43 percent. In spite of the percentages, it appears men and women are about equally as likely to consider a charitable gift annuity (due to the fact that there are simply more women than men in the age ranges of the primary prospect pool).
The average age of a charitable gift annuitant continues to be 79 years of age, and about 75 percent of annuitants are older than 75. Persons age 70 to 90 accounted for approximately 94 percent of all immediate gift annuitants over the five-year period studied.
These are just a few of the highlights of the 2013 Survey of Charitable Gift Annuities. Organizations with an interest in charitable gift annuities can access the full report, including information on state regulations, minimum ages, minimum amounts and more, at the ACGA’s website.
Moving forward.
With record numbers of Americans currently in the prime age range for gift annuities, those with active charitable gift annuity programs may expect to see growing interest in this time-tested gift planning vehicle.
Recent surveys conducted by the Pew Research Internet Project indicate that 62 percent of Americans over 77 remain offline, making it increasingly important to carefully combine print with other marketing channels where gift annuities are concerned.
If one of Sharpe Group’s program consultants may be of assistance as you consider the implications of the latest ACGA survey, please call 901-680-5300 or connect with us online.
