SunAmerica Retirement Markets Inc., the
AIG subsidiary, has released two new variable annuity riders — and the company vows to compete with rival carriers to grab advisers' attention.
This week, the insurer released its SunAmerica Income Plus 6% and SunAmerica Income Builder 8%, a pair of guaranteed minimum withdrawal benefits that will work with the company's line of Polaris variable annuities.
As recently as last month, financial advisers were lukewarm about SunAmerica variable annuities, citing high costs and less-than-stellar investment options. There was also the matter of the perceived link to the troubled parent company.
However, Rob Scheinerman, senior vice president of investment and product management at SunAmerica Retirement Markets, says that the company is healthy and ready to take on variable annuity rivals, such as
Prudential Financial Inc. and Jackson National Life Insurance Co.
“Those companies have good features, but we can also compete effectively,” he said. “We have a more competitive roll-up rate, and we provide more income sooner — there are a bunch of attractive features that will enable us to compete with them.”
The Income Plus 6% feature allows clients to take 6% withdrawals as early as age 45. Clients can also receive a partial income credit if they make withdrawals that are below the 6% limit. The credit is equal to the difference between the amount withdrawal and 6% of the client's income base.
Meanwhile, the Income Builder 8% grants investors an 8% income credit each year they choose not to take a withdrawal during the first 12 years. It also offers a withdrawal rate of up to 5.5% as early as age 45.
In both contracts, if clients wait 12 years to take withdrawals, the amount they had initially invested will double, Mr. Scheinerman said..
The fees on the contracts are tied to the cost of managing the risk and track the Chicago Board Options Exchange volatility index. Higher market volatility raises the cost that insurers pay to hedge against risk. This way, clients pay 110 basis points for the first year. After that, the fee can rise or fall according to market risk, but the fee rate won't fluctuate by more than 25 basis points on an annualized rate.
As always, there is a trade-off for the benefits. Clients can build their own portfolio of fixed income and equities — but may not exceed a 70% concentration in equities. They can also use a balanced fund or an 80% equities/20% bonds model portfolio. Additionally, SunAmerica puts 10% of the client's investment into a secure value account — a fixed account — that can also count toward the bond allocation.
