An annuity unveiled this week by Prudential Financial ushers in a new era of simplicity and affordability, company executives said.
The deferred income annuity, known as GIFT, or Guaranteed Income for Tomorrow, allows applicants to enroll through work with monthly contributions of as low as $100.
GIFT is designed to supplement retirement benefits of workers who are already taking advantage of an employer-sponsored retirement plan such as a 401(k), said Kent Sluyter, president of Prudential Annuities.
The annuity is being offered on an after-tax, employee-paid basis only via payroll deduction or electronic funds transfer. Only employers and associations who are clients of Prudential Group Insurance are eligible to make GIFT available to employees or to members, the company said.
Among the objections workers have to getting started early with a retirement savings program is that there are just too many choices.
Too many choices often lead to what is known as selection paralysis, leading workers to put off saving for retirement, surveys show.
To overcome the challenge, GIFT’s options and features are purposely limited so that buyers aren’t overwhelmed by the experience, said Dianne Bogoian, head of product for Prudential Annuities in Newark, N.J.
There is only one death benefit built into the product, and only one simple income option, Bogoian said.
A buyer selects the income start date at enrollment.
The start date can be as early as 13 months from the contract issue date, as long as the owner is at least 59.5 years old and as long as income stars before the annuitant's 85th birthday.
Annuitants have the option to change the income start date only once so long as the change is made within five years of the original income start date selected at enrollment, the company said.
“This is by far the simplest annuity product ever launched by Prudential,” Bogoian said.
Another obstacle some workers point to for not setting aside money for retirement is the financial barrier to entry is too high.
Mutual funds often require opening an account with a minimum of $1,000 or even $3,000, which many people can’t afford.
Applying, enrolling and obtaining service for the annuity is completely digital with consumers interacting through the GIFT enrollment website, the company said.
A strictly digital-only product is a first for Prudential Annuities, Bogoian said.
Employees or association members receive a link to Prudential's GIFT enrollment website where they can decide to buy the annuity.
Agents are not involved, but Prudential customer service representatives are available to answer product, process and website questions, the company said.
The purchase rates, which are based on interest rates, age on contribution date, gender, income start date and income frequency, are applied to each premium contribution to calculate the guaranteed income.
Prudential began offering GIFT March 31, under a distribution agreement with the Texas Medical Association Insurance Trust.
The trust will provide 50,000 Texas Medical Association members with access to the GIFT enrollment website, executives said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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