Prudential Expands Suite of Optional Living Benefits in Its Variable Annuities |
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Written by U.S. Insurance News
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Monday, 04 February 2008 |
Prudential Annuities, the domestic annuity business for Prudential Financial, Inc. recently announced it will expand its offering of variable annuity optional living benefits. The financial services company associated with the Rock of Gibraltar is launching innovative new options that can capture an annuity's highest daily value.
Highest Daily Lifetime SevenSM and Spousal Highest Daily Lifetime SevenSM are variable annuity optional living benefits that offer a protected withdrawal value. This value is based on 7% annual compounded growth on the highest daily account value and daily opportunities to capture greater lifetime income with a 5%-8% income stream. This income stream amount depends on age at first withdrawal and is guaranteed for life. It is not necessary to annuitize in order to receive this benefit. An optional accumulation benefit, Highest Daily Guaranteed Return OptionSM (HD GRO), offers the protection of a guaranteed minimum account value and the opportunity to automatically lock in the annuity's highest daily value. In combination, these latest benefits solidify Prudential Annuities as the only company able to offer optional living and death benefits that can guarantee an annuity's highest daily value.
HD Lifetime Seven and Spousal HD Lifetime Seven build on the success of Highest Daily Lifetime FiveSM. These two benefits will replace the former rider in all states where the two new options are approved. Through the application of these two riders, investors are afforded the opportunity to increase their annuities' income potential every day the market is open-up to 250 times a year (for the first ten years or until the first withdrawal if earlier).
"From our perspective, the living benefits revolution began in 2005 with the debut of Lifetime Five-the industry's groundbreaking guaranteed-withdrawals-for-life living benefit," said David Odenath, President of Prudential Annuities. Odenath went on to say the that the previous product Highest Daily Lifetime Five and the unveiling of the of Highest Daily Lifetime Seven "[n]ot only demonstrates our steadfast commitment to helping Americans plan for a successful retirement, but makes us the only company able to offer optional benefits that can guarantee an annuity's highest daily value. It's a title we're extremely proud to hold."
The overall election rate for optional living benefits on Prudential Annuities' variable annuities during the third quarter of 2007 was 81%, which is a direct reflection of the popularity of these features. Total account values with guaranteed withdrawal benefits for life at the end of that quarter were $14.7 billion.
Key features of HD Lifetime Seven and Spousal HD Lifetime Seven include:
- Daily Step Ups Before Withdrawals Begin: HD Lifetime Seven and Spousal HD Lifetime Seven give investors the opportunity to increase their Protected Withdrawal Value (the basis for guaranteed lifetime income) every day the market is open for trading. The Protected Withdrawal Value is determined by comparing every daily account value growing at an annual 7% compounded rate of return for the first 10 years from benefit election or until an investor's first withdrawal, whichever is sooner. The protected withdrawal value is only available through withdrawals. It is not available as cash or a lump sum.
- Guaranteed Lifetime Income: HD Lifetime Seven and Spousal HD Lifetime Seven offer a lifetime annual income stream ranging from 5% to 8% of the Protected Withdrawal Value, with the potential for future increases and no annuitization required. (Annuitization at a particular age may be required by the terms of the base annuity.)
- Proprietary Risk Management Model: HD Lifetime Seven and Spousal HD Lifetime Seven incorporate the fundamentals of a proven proprietary risk management model that monitors an investor's account daily, and, only if specified by the model, systematically transfers amounts between the variable investment portfolio and the AST Investment Grade Bond Portfolio.
- Post-Withdrawal Step-Up Opportunities: After withdrawals begin, HD Lifetime Seven and Spousal HD Lifetime Seven provide annual opportunities for increased income based on the account's highest quarterly value.
Key features of HD GRO include:
- Principal Protection Guarantee: HD GRO creates the initial guarantee on the day that the benefit is added to the annuity, and guarantees that the account value on the tenth anniversary of that day will not be less than the initial account value. Each benefit anniversary after that, a new guarantee is created. With respect to each subsequent guarantee, HD GRO identifies the highest account value that occurred between the date of that benefit anniversary and the date on which HD GRO was added to the annuity, guaranteeing that the account value ten years after that benefit anniversary will be no less than the highest daily account value that occurred during that time period. Purchase payments are adjusted for any credits or withdrawals.
- Proprietary Risk Management Model: Like HD Lifetime Seven and Spousal HD Lifetime Seven, HD GRO incorporates the fundamentals of a proven proprietary risk management model that monitors an investor's account daily, and, only if specified by the model, systematically transfers amounts between the variable investment portfolio and the AST Investment Grade Bond Portfolio.
"Whether an investor's goal is retirement income, accumulation or beneficiary protection, Prudential Annuities has a highest daily strategy that can help address his or her needs," opined Senior Vice President of Marketing for Prudential Annuities, Jacob Herschler. "Today's announcement demonstrates our unique ability to provide financial professionals with innovative solutions for Americans in or approaching The Retirement Red Zone® - the critical investment window five years before and after retirement."
HD Lifetime Seven, Spousal HD Lifetime Seven and HD GRO can be chosen at either date of contract issuance or post issuance. They may not yet be available in all states, however, and cannot be elected in conjunction with certain other optional benefits. Withdrawals under the program are subject to all of the terms and conditions of the annuity, including any withdrawal charges that may apply. Withdrawals of taxable amounts will be subject to ordinary income tax, and if taken prior to age 59 1/2, a 10% federal tax penalty may apply.
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