NAFA Responds to Inaccuracies in IndexUniverse.com Article
Equity Index Annuities: Great Idea Or Flawed Flop?
Written by Jeremy Burger
IndexUniverse.com
Wednesday, 10 June 2009
It is hard to understand why IndexUniverse.com would choose to publish an article filled with
misleading information and factual errors when its stated goal is to provide the “industry's best
news, columns, research, and features and the website aims to be “educational, thoughtprovoking,
and, rigorously independent in perspective.” Since fixed indexed annuities have an
interest crediting formula that is calculated using an index, we thought your readers might be
interested in the facts rather than the article’s reiteration of the same errors made by those in
the investing world. NAFA hopes this information helps IndexUniverse.com meet its goals by
publishing this clarification of information and, in so doing, achieve our mutual aim of aim of
education and independence
Error #1
Some policies make you wait as long as 20 years and charge you 20 percent for first-year
withdrawals.
The Facts:
1. There are 273 products available today and the maximum surrender period is 16 years
NOT 20.
2. The majority (82%) have surrender charge periods of 10 years or less.
3. 2/3rds of the products with surrender periods of 14-16 years (less than 1/10th of the total
products available) offer interest rate bonuses up front.
4. Only one product charges 20% surrender charge in the first year and that product also
pays the customer a 10% premium bonus on all premiums paid in the first year, making
the net charge roughly 10%. This product also automatically adds a Lifetime Income
Benefit Rider that guarantees annual withdrawals. Many consumers have decided that a
bonus and guaranteed income are benefits worth considering in exchange for
committing to a longer surrender period. Had Mr. Burger done more initial research, he
would have found that most states have adopted the latest NAIC annuity standard nonforfeiture
law which does not allow net surrender charges at the level he excoriates.
Error #2
Your guaranteed minimum return… probably doesn’t apply to the full balance in your
account.
The Facts:
Mr. Burger’s error is often made by those who write for the investment world because they
typically do not understand the insurance element of guaranteed minimum interest.
The minimum guarantee is in indexed annuity productsi provide a minimum guarantee that is a
minimum interest calculation (based on the state’s non-forfeiture law) such as 2 or 3% on 90%
of premiums or the contract’s current account value, whichever is greater1. The minimum
1 Based on the products currently available.
Equity Index Annuities: Great Idea Or Flawed Flop?
Written by Jeremy Burger
IndexUniverse.com
Wednesday, 10 June 2009
It is hard to understand why IndexUniverse.com would choose to publish an article filled with
misleading information and factual errors when its stated goal is to provide the “industry's best
news, columns, research, and features and the website aims to be “educational, thoughtprovoking,
and, rigorously independent in perspective.” Since fixed indexed annuities have an
interest crediting formula that is calculated using an index, we thought your readers might be
interested in the facts rather than the article’s reiteration of the same errors made by those in
the investing world. NAFA hopes this information helps IndexUniverse.com meet its goals by
publishing this clarification of information and, in so doing, achieve our mutual aim of aim of
education and independence
Error #1
Some policies make you wait as long as 20 years and charge you 20 percent for first-year
withdrawals.
The Facts:
1. There are 273 products available today and the maximum surrender period is 16 years
NOT 20.
2. The majority (82%) have surrender charge periods of 10 years or less.
3. 2/3rds of the products with surrender periods of 14-16 years (less than 1/10th of the total
products available) offer interest rate bonuses up front.
4. Only one product charges 20% surrender charge in the first year and that product also
pays the customer a 10% premium bonus on all premiums paid in the first year, making
the net charge roughly 10%. This product also automatically adds a Lifetime Income
Benefit Rider that guarantees annual withdrawals. Many consumers have decided that a
bonus and guaranteed income are benefits worth considering in exchange for
committing to a longer surrender period. Had Mr. Burger done more initial research, he
would have found that most states have adopted the latest NAIC annuity standard nonforfeiture
law which does not allow net surrender charges at the level he excoriates.
Error #2
Your guaranteed minimum return… probably doesn’t apply to the full balance in your
account.
The Facts:
Mr. Burger’s error is often made by those who write for the investment world because they
typically do not understand the insurance element of guaranteed minimum interest.
The minimum guarantee is in indexed annuity productsi provide a minimum guarantee that is a
minimum interest calculation (based on the state’s non-forfeiture law) such as 2 or 3% on 90%
of premiums or the contract’s current account value, whichever is greater1. The minimum
1 Based on the products currently available.
