By Linda Koco
At a time when many variable annuity carriers are putting their guaranteed lifetime withdrawal benefit (GLWB) riders on a diet in terms of features, W&S Financial Group has added a richer design to its GLWB portfolio.
The company has launched Guaranteed Lifetime Income Advantage Plus, an optional rider with a 7 percent rollup that is the same for annuitants of all ages.
By comparison, the company’s existing GLWB — which bears a similar name, Guaranteed Lifetime Income Advantage but without the Plus -- has a rollup that ranges from 4 percent to 6.5 percent, based on annuitant age.
A rollup provision is the amount by which a variable annuity carrier increases the benefit base used computing the rider’s guaranteed lifetime withdrawal amount. In the case of the Plus rider, the increase occurs annually in each of the first 10 contract years when no withdrawals are taken. The percentage is taken against net contributions.
The 7 percent rollup is new for Western & Southern Financial Group, according to a spokesperson. Western & Southern is parent of Integrity Life and National Integrity, the carriers that are distributing Plus with their AnnuiChoice and Pinnacle variable annuities. The Cincinnati company is also parent of W&S.
Although 7 percent rollups were once fairly common in GLWBs before the 2008 recession, they are harder to come by in today’s variable annuities. Many of today’s product offer rollups in the range of 5 percent to 6 percent or so. Some are higher but may be offered in limited age bands.
The cutbacks were due to the de-risking that many carriers undertook during the post-recession period. To align their products with market conditions, many curtailed various contract features, including the rollup percentage. (Some carriers stopped offering their GLWB guarantees altogether, too, at least for a while).
In the past year, some carriers have gradually begun reintroducing more generous variable annuity features but this is not yet widespread. The new Plus rider provides an example of how this expansion can happen.
Western & Southern intends to keep both GLWBs on the market, the spokesperson said in an email. The carrier is positioning Plus, which costs 135 basis points, “for the advisor and client who determine the higher roll-up during the accumulation period merits the added 45 basis points in cost.”
It is positioning the original rider, which costs 90 basis points for an individual life or 115 basis points for spousal lives, for “the cost conscious advisor and client.”
The carrier decided to keep the cost for Plus exactly the same whether for individuals or spouses as a matter of simplicity.
Instead of increasing the price for joint life payouts, the Plus rider reduces the payout amount for both spouses by 10 percent. The formula is:
· Benefit Base x Withdrawal Percentage = Individual lifetime payout
· Benefit Base x Withdrawal Percentage x 90 percent = Spousal lifetime payout
Both versions of the rider offer what the company calls a “self-style allocation option.” It has more than 50 investment options with specified allocation ranges defined by investment category. This option is designed for use by “financial advisors who select the fund options for their clients as part of their value proposition,” the spokesperson said.
Two other allocation options are managed risk investing and lifecycle investing, with specified investments.
Approved in 48 states and the District of Columbia, Plus is being distributed by through broker-dealers and financial institutions. Minimum initial deposit is $25,000. Withdrawal percentages range from 4 percent to 6.25 percent, based on age. Lifetime withdrawals can begin after age 60 (for individuals) or after age 60 of the youngest spouse (on joint contracts).
Annuity News Editor-at-Large Linda Koco, MBA, specializes in life insurance, annuities and income planning. Linda can be reached at firstname.lastname@example.org.
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