History of AnnuitiesA vailable for more than 2,000 years, the annuity has proven itself to be one of the oldest, most enduring and historically dependable financial tools on earth. In ancient Rome, speculators sold financial instruments commonly known as “annua.” Translated from the jargon of the times, annua meant “annual stipend,” or annual payout, which still applies to the annuity today.
Benjamin Franklin used annuities to help the Cities of Philadelphia and Boston provide funds for their citizenry. The last of these annuities lasted until 1991 when the City of Boston finally cashed it in. So although Benjamin Franklin did not invent annuities, he was a great supporter of their benefits.
It turns out that one of the first users of annuities in the American Colonies was the Presbyterian Church, which used annuities to provide for aging/retired ministers and their families way back in 1720. They expanded their use for widows and orphans and became a backbone of financial security for people of that time.
It wasn’t until 1912 that Americans could buy annuities outside of a group. The Pennsylvania Company for Insurance on Lives and Granting Annuities was the very first American company to offer annuities to the general public.
Annuity growth from that point on was steady, but annuities really started to catch on in the late 1930s. Concerns about the overall health of the financial markets prompted many individuals to purchase products from insurance companies. In the midst of the Great Depression, insurance companies were seen as stable institutions that could make the payouts that annuities promised. Remember also, the Babe Ruth Story. He invested his life savings in annuities during the Depression and never lost a single penny.
The entire country was experiencing a new emphasis on saving for a “rainy day.” The New Deal Program introduced by FDR unveiled several programs that encouraged individuals to save for their own retirement. It was around this time, too, that group annuities for corporate pension plans really developed. Annuities benefitted from this new-found savings enthusiasm.
There are over two thousand different life insurance companies in the United States. Collectivley, these companies own, control, or manage more assets than all of the banks in the world combined. The insurance industry of North America owns, controls, or manages more assets than all of the oil companies in the world combined.