Variable Annuity Information and Resources » Variable Annuity Industry

Features of Variable Annuity Products

admin — Wed, 02 Feb 2011 03:42:20 +0000

What is a variable annuity? As in the case of any annuity scheme, a variable annuity is a contract between you and insurance company to make periodic payment to you starting from a predetermined date. This date can be immediately after making the first payment. One major feature of variable annuity is that you hold the investment option within a range of options offered. The normal options offered are mutual funds. They invest in stocks, bonds, government securities and other money market instruments. The value of your variable annuity depends on the performance of the funds in which you have invested.

Common features of annuity products The most common feature of all annuity products is that the investor or the investor and spouse will get a periodic income until death. The payments to the investor may start immediately or from a date mutually agreed by the company and the party. The periodic payment can be fixed or of an increasing nature. The payment can be stopped after a fixed period or can continue until death. There is no tax on the payments made by the investor. This applies to the capital gains also.

How do you qualify for variable annuity? Anyone can purchase a variable annuity contract. The payment also can be made in one lump sum or in fixed periodic installments. One thing you must bear in mind is that a variable annuity scheme is not good as a short time investment. When you withdraw the money it will attract tax. The charges levied by the insurance company are also considerable making it not attractive for short term investment. Variable annuity is a good investment as a long term one to ensure continued income in retirement.

The appreciation of your investment in a variable annuity depends upon the purchases you make with your money. You are the one who makes the decision on where the money is invested. Part of your money can be invested in a deposit account which brings in a low, fixed rate. Another part can be invested in stocks. The performance of these stocks affects the value of your investment. When the stock value goes up you make a gain. But, if the stock value goes down your loss also will be considerable.

Social security and taxation Payments made to purchase variable annuity is tax deferred. So you get a tax emption to purchase annuity. There is no tax on the appreciation your investment. The tax becomes due only when you start getting payments from the insurance company. That is also due only on the amounts you receive from the company. If you are eligible for variable annuity receipts you can retire earlier than the permitted age of 65. When you retire at the age of 62 you may get a lower social security payment. But, the income from the variable annuity makes up more than the reduction in social security payment.

In a variable annuity scheme, if you select the investments wisely you can make your retirement more enjoyable. It also allows you to retire early.

VARIABLE ANNUITY MARKET

admin — Sun, 16 Jan 2011 03:25:37 +0000

In the US, 77 million baby boomers of the 1940s turned 63 –their desire to beat inflation and to secure a steady post retirement income may have spurred the Variable annuity market.

The market for the Variable Annuity-a contract with an insurer to channel your funds into investment options like shares and bonds and get higher but variable returns-is attracting quite a few customers.

The Variable Annuity allows you the freedom to choose how to invest in specific share or bonds and choose the best option to maximize your future income.

What is the size of the US market and other markets in the world?

NAVA reports reveal that The US recorded sales of USD 182 billion resting on a net asset growth (NSG) of USD 1.5 trillion. In contrast, the newer Japanese market registered sales of USD 49 billion on an NSG of USD 120 billion. In the UK sales topped USD 15 billion.

What need does it meet?

Variable Annuities satisfy the needs of customers desiring higher income earning potential; they are for customers who take higher risks to get higher returns; they offer greater elasticity in linking an individual’s surplus funds to investment options today that result in a steady benefit tomorrow!

What is the projected growth of the market in US and internationally?

Presently, USD $800 million is being transferred from savings to variable annuity schemes per day and more than $200 billion in sales will be generated, in US alone, annually. The Japanese market is projected to reach $350 BN in assets this year. Europe’s aging population is growing; they are well off with high income lifestyles that are a beacon for protected investments projected to grow to USD 45 billion.

What will drive the growth?

In US, senior citizens are estimated to grow from 12.20% to 16.20% of the nation’s population by the year 2020.The aging of the population will create new niches for retirement planning. Government policies withdrawing, curtailing funding for medicare and social security will also drive up the popularity of variable annuities.

Companies are creating consumer friendly products that will boost market growth. The high charges of variable annuities will be pegged down; flexibility in designing will create innovative and better products that can compete with cheaper social security, employee pensions and mutual funds. heir benefit clauses will be added to sweeten the contracts. stronger investment guarantees will offer better protection to the consumer from high inflation and volatile stock markets.

I invested $ 93000 in variable annuities bestowing living benefits; I was assured 7% annual return, provided I did not withdraw the fund during a ten year period. On maturity, my investment would have grown to $ 188, 000. I can enjoy a 5% encashment based on the account value.

It’s a great wealth enhancing tool to finance that high income post retirement lifestyle you dream about. Don’t miss out on a great opportunity. Contact an Independent Financial Adviser (IFA) now and settle your Variable Annuity contract today!

Variable Annuity Regulations, taxation and industry

admin — Tue, 26 Jan 2010 00:45:19 +0000

If you are one of those millions who are looking for a good way to invest your retirement money, variable annuities could be a great option. This is a very popular insurance contract that provides you payment depending upon the performance of your underlying mutual funds portfolio. Marketed by insurance companies, variable annuities earlier were targeted by various malpractices but now after incorporation of new laws and regulations in this regard, the system has become error proof.

Laws and Regulations:

The annuities contract in United States is defined by the Internal Revenue Code and regulated by each individual state. Variable annuity can be legally put down as a group of investments offered to you by life insurance companies that primarily consists of mutual funds and at times a choice of fixed returns investment choices as well. Under the variable annuity contract, the insurer agrees to make periodic payments to you beginning either immediately or at some future date. The investment options available for you are to make investments in stocks, bonds, money market instruments or even a combination of all three. The variable annuities contract places your accounts separately from an insurer’s general account. Such account is not subject to claims from an insurer’s general account at all.

Taxation Implications:

A variable annuity allows you to receive periodic payments even when you have outlived your assets. This helps you to secure your post retirement days and tax penalties exist only where such withdrawals are made before the age of 59½. In such case the excess benefit received by the investor is charged at normal income rates. This is why variable annuity is called as tax deferred annuities. Non-annuity payouts are penalized and charged as gain and later capital return to the investor. Though the new regulations have reduced the rates of capital gains, yet the rates remain same on variable annuities for withdrawals.

As per section 1035 of U.S. Tax Code, you can exchange an existing variable annuity contract for a new annuity contract. Also, any additional tax can be avoided on the income and investment gains that feature up in your variable annuity account. You may however need to pay surrender charges on the older annuity contract.

Misselling with regard to Variable Annuity:

This is with regard to the dubious tactics deployed by some insurance agents and in spite of steps being taken up by government, they are still at large. The most common example of misselling with regard to variable annuity is its being promoted as a non-taxed income way out. Many people are misled to believe that making such investments will help them to wave off the income tax they otherwise need to pay on such investments. There are also many instances where the insurance agent ploy things up with the help of his buddies and sell such variable annuity contracts to them. These agents who are involved in affinity fraud make use of such relations to make sale.

Industry groups that help understand complexity:

There are many industry groups today who can help you gain rich returns on your investments via variable annuity contracts. Assuming the fees charged to you is same as for the fixed annuity contracts, it is more probable that you will earn more quicker returns on your taxable mutual funds held in regular brokerage account.

Today insurers are being challenged to offer more competitive products. This must be why the variable annuities market has grown by leaps and bounds. The market today is improvising its products for more diversity and hence while you shop around for variable annuities, makes sure you get the best for yourself.