Aviva/BAA12 Vs. Others...

[nathan.lee]

What I meant in terms of clarification was how this fee played out with 2 yr. crediting. Is fee applied as you stated every 2 yrs. to mirror the crediting method? or is this done yearly?

Well...let's do some math.​

Let's assume the Annexus BAA 10 with $100K, no riders, and 100% allocation into Option A (60% Index/40% Declared at 2.95% annual fee).​

We'll compare this to a product with an Annual Pt. to Pt. crediting method with a cap of 4%.​

Both indexing methods key off of the S&P 500.​

At the issue date of both contracts the S&P 500 is at 1000.​

At the first anniversary the S&P 500 is at 1100. (10% gain)​

At the second anniversary the S&P 500 is at 1210. (another 10% gain)​

Annual Pt. to Pt. with 4% cap: $108,160​

Year 1 - Account value is credited 4% which equals $104K (10% increase in S&P 500 subject to a 4% cap)​

Year 2 - Account vaule is credited another 4% which equals $108,160 (another 10% increase subject to the 4% cap)​

Annexus BAA Option A: $109,460​

Year 1 - Account value is not credited ​

Year 2 - S&P 500 increases 21% (1000*1.21 = 1210)
21% - 5.9% (2*2.95% annual fee) = 15.1%​

$60K *1.151 = $69,060
$40K *1.010 = $40,400​

Total account value at end of 2 yr. period = $109,460​

So, in this scenario where the S&P 500 returns a 10% increase in back to back years the 2.95% fee or spread appears to be "worth it."​

Let's look at another scenario where the S&P 500 sees back to back years of 5% growth.​

At the issue date of both contracts the S&P 500 is at 1000.​

At the first aniversary the S&P 500 is at 1050. (5% gain)​

At the second anniversary the S&P 500 is at 1102.5 (another 5% gain)​

Annual Pt. to Pt. with 4% cap: $108,160​

Year 1 - Account value is credited 4% which equals $104K
(5% increase in S&P 500 subject to a 4% cap)​

Year 2 - Account value is credited another 4% which equals $108,160 (another 5% increase subject to a 4% cap)​

Annexus BAA Option A: $103,010​

Year 1 - Account value is not credited​

Year 2 - S&P 500 increases 10.25% (1000*1.1025 = 1102.5)
10.25% - 5.9% (2*2.95% annual fee) = 4.35%​

$60K *1.0435 = $62,610
$40K *1.0100 = $40,400​

Total account value at end of 2 yr. period = $103,010​

So in this scenario the crediting method is not as advantageous. ​

 

[Newby]

With indexed annuities you will never know which crediting methods are best until the time is past and you look backwards. If the market only moves up a little, a 100% participation with 3% cap and no fee or spread would do the best. If the market takes huge dips and upswings, an uncapped with a % of participation will do better. Annual point to point is a little more of a gamble than monthly average BUT could be the better choice. You just don't really know in advance.

But if you sell it for what it is, a financial product that is free from market risk and USUALLY will perform a little better than the current rate on CDs over a 10-year period or longer BUT with no guarantee of performance and the option to turn on an income stream they can never outlive...people are Never disappointed.

If you oversell it...there is a lot of disappointed people. But never as disappointed as people who are in the market in a down year.

BAA claims their annuity has been back tested to out perform EVERY other indexed annuity on the market MOST of the time. I'm not enough of a math wiz to know if that's true. Every person I've sold one to is happy.

 

[scagnt83]

The Annexus fee is not annual. It is per crediting period.

 

[nathan.lee]

The Annexus fee is not annual. It is per crediting period.

See my response on the other thread. I'm sure neither one of us want to maintain multiple threads with the same topics. haha

 

[pbbaseball]

it's point to point strategy on that product