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They're Changing Our Annuity!

Sunday, April 21, 2013 - 9:54 AM
From the Wall Street Journal
After four years of cutting benefits in products sold to new customers, insurers now are going after contracts held by longtime customers. The changes include clamping down on fund choices, raising fees, blocking additional account contributions and even trying to buy back the contracts.

Read more (To access the article, you may need to go through Google News)
2
Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708
1. Sunday, April 21, 2013 - 10:04 AM
As I have expressed in these forums in the past, annuities on their face sound great, but in practice, they are not protected by FDIC insurance and have other pitfalls, such as this. They only work over the longterm, and these companies might not even be in business for the longterm. And you are locked in lie you are in a CD -- and yet, as here, could be subject to changes, fees, other rule changes after locking in. 

Still, with that fully considered, they might be good -- maybe. But its somewhat the luck of the draw. If your provider sticks around for your lifetime, it works; if your's goes under (as AIG would have without a bailout), you lose. 

I keep wanting one, but keep nixing that thought because of all the unknowns going forward for many, many years (hopefully). 
5
me1004me1004373 posts since
Jan 16, 2010
Rep Points: 2,600
2. Sunday, April 21, 2013 - 10:07 AM
.

Dear KenBDG,

The article does not specify which exact Variable Annity the author is referring to, but it makes sense to examine carefully the contract one has with the issuer like AXA Equitable.  Most of the issuers I know of hold the assets in "separate account" for Variable Annuity.  However, last I checked, the contract offered by AXA Equitable does not include the "separate account" provision.  Without this, the assets in Variable Annity at AXA belong to the issuer and the account holder simply has piece of contract paper, which makes such as arrangement (almost) on par with Fixed Annuity and/or Immediate Annuity.

I've been approched by different FA's several times in the past to sell me a Variable Annuity product from AXA Equitable that emulates Structured Notes (which I like).  But every time I had to reject the product as there is no "separate account" provision.

Yours Truly,
- Anon
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
3. Sunday, April 21, 2013 - 10:21 AM
.

Dear me1004,

There of course are Variable Annuities that have no lock. I assume that by "lock" you are referring to "surrender" period.  Jefferson National offers a Variable Annuity with no surrender period.

If your reference to "lock" is something other than the surrender period, then let me know what's this lock?

Almost every Annuity always offers a short period within which one can open the Annuity and try it out.  (Almost like a test-drive that the car dealers offer.) If one does not like it, then s/he has an option to close the Annuity without facing any negative consequences.  Also if after a few years one wants to move to different issuer, then there a provision of a 1035 exchange.   (Almost like closing an IRA at one custodian and using the proceeds to open an IRA with another custodian.)

Yours Truly,
- Anon
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
4. Sunday, April 21, 2013 - 10:41 AM
.

Dear me1004,

 
If your provider sticks around for your lifetime, it works; if your's goes under (as AIG would have without a bailout), you lose.

No. Not necessarily.

Your belief is a common misconception I've noticed among many.

Survival of the Issuer of a variable annuity that has "separate account" provision is not essential for the return of the assets held by the annuitant(s).  Such assets belong to the annuitant only.  Creditors, Claimants, Plantiffs, etc. of the issuer cannot get access to the asset maintained by the issuer under "separate accounts" for the annuitants (under the current laws).

Misconception you have is akin to saying that return of money in your checking account that are within the FDIC/NCUA limits, will depend upon the survival of the institute that has offered the checking account.  Unless the law changes (e.g. Cyprus) return of such assets do not at all depend upon the survival of the institute which holds your assets under checking account agreement.

Yours Truly,
- Anon
2
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
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