1. Provide caregiver benefits. Principal already offers a “caregiver income benefit” on the fixed annuity in its Principal Income IRA, says Drew A. Denning, second vice president-retirement income management at Principal, Des Moines, Iowa. This feature increases the monthly payout if caregiving triggers are met. The benefit is not yet in Principal VAs, but he says it’s an area to explore because “life events are real issues; people need the liquidity to pay for them.”
2. Offer lifestyle funds. Using these, whether for income or withdrawal benefits, is on the rise, says James R. McInnis, president-annuity distribution, ING, West Chester, Pa., office. The insurer offers such funds in conjunction with asset allocation. The Hartford Financial Services Group Inc., says its new Target Retirement Funds are based on a specific, target retirement date. (The company also offers a Lifetime Income Builder option with its VAs.)
3. Tweak asset allocation. When income planning clients choose the GMWB for life option, most VAs require the client to invest in one of four or five asset allocation models. Now, Phoenix is expanding its model options to nine. (The four new models use a fund of funds approach, investing only in exchange traded funds.) VA owners who want Phoenix’s GMWB rider must choose one of those options, says Timothy Paris, vice president and actuary-annuity product development at Phoenix. But now they have more choice.
4. Reduce investment restrictions tied to the GMWB. ING says owners can choose their own investment options, as long as 20% of the money is invested in the designated fixed allocation fund. Meanwhile, both AIG/SunAmerica and Nationwide have decided not to restrict a GMWB client’s investments with an allocation requirement. “It’s too risky” to lock in a customer’s investment options with restrictions, explains AIG’s Robert Scheinerman, senior vice president-marketing, Los Angeles. This can limit exposure to equities, he says. Besides, “baby boomers are all about choice and investment flexibility.” With no restrictions, the advisor is free to work with the client on investment selection in view of the overall portfolio.
5. Allow conversions. 401(k) plan sponsors could add a VA option to their plans that ties asset allocation to a GMAB (guaranteed minimum accumulation benefit) with rollups, says Denning. This GMAB would be in place during the working years. Then, five years before a participant retires, a conversion feature could kick in, turning the GMAB into a GMWB for the retirement phase of life. “That would be like a lifetime fund with a guaranteed floor,” he says, noting that Principal is “aggressively researching this.”