Prudential once again has pulled back on the living benefits in one of its most popular variable annuities.
Last week, the insurer announced the release of two living benefits riders, the Highest Daily Lifetime Income and Spousal Highest Daily Lifetime Income, to replace the Highest Daily Lifetime 6 Plus.
In these latest iterations of the insurer's living benefits, lifetime income is based on 5% compounded growth on the annuities' highest daily account value. That is down from 6% in the previous product.
And while the riders boost the protected value of the variable annuity by 200%, a client must wait 12 years to make withdrawals. Previously, annuity holders only had to wait 10 years before taking money out.
Despite the reduction in benefits, the insurer still expects to maintain its leadership position among the three largest VA sellers.
“I think we still have — and many advisers tell us — a compelling and leading value proposition with these product changes,” said Bruce Ferris, executive vice president of sales and distribution at Prudential Annuities, the domestic annuity arm of Prudential Financial Inc.
But there has been grumbling among financial advisers about recent changes to the wildly popular living benefits.
In August 2009, Prudential replaced its Highest Daily Lifetime 7 Plus with the Highest Daily Lifetime 6 Plus version. That product trimmed back the benefits of the 7 Plus product.
Low interest rates were behind the decision to reduce the benefits, Mr. Ferris said.
“These are long-term liabilities and obligations to the advisers and clients,” he said. “It's our belief and commitment that we want to be a long-term player in this business and this is what responsible leaders do.”
Some said that they rushed in their last applications for the old product to beat the deadline.
“You used to be able to get a 600% [growth on protected value] with HD 7,” said Jim Saulnier, an adviser at an eponymous firm. “I always recommended these annuities with the withdrawal benefit for the great growth that Prudential offered on the benefit base.”
For his part, Mr. Ferris said that he was “a bit surprised” to hear that some advisers didn't take the announcement very well. He indicated that the advisers he had spoken with were “relieved” that a version of the highest daily feature itself was still available.
“I acknowledge that there are some advisers who aren't happy,” Mr. Ferris said. “I think the advisers we have deep relationships with — that relationship isn't just based on a product but a process, and our desire to be their best resource for practice management and business development.”
That may be tough to sell to Mr. Saulnier. “I'm going to be hard-pressed to utilize this annuity,” he said.
E-mail Darla Mercado at [email protected].
