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 [...]]]> 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.

A variable annuity is a mutual fund which offers tax shelter. It offers much more than just a tax free growth for the investment. Most large insurance companies offer their [...]]]> Due to its sudden demand, it is not surprising that many players have come out with different schemes. And choosing the best one is to your interest.

A variable annuity is a mutual fund which offers tax shelter. It offers much more than just a tax free growth for the investment. Most large insurance companies offer their customers options for variable annuity. These plans vary widely from company to company. The reason for this is that most variable annuities are tailored to keep up with the rate of inflation.

When you are conducting a survey for purchasing variable annuities, take into account three main aspects: Performance of separate accounts, the total cost of the plan along with related expenses, riders that can be attached to the existing scheme.

Performance of separate accounts-

The best companies’ fine tune the variable annuity schemes, so that the money of the investors is placed under different high risk as well as low return vehicles. You cannot cut off or shield any investment completely from market fluctuations. So by distributing the money among high risk high return and low risk low return schemes offer an average return with protection from sudden falls in the market.

Administrative charges and related expenses

Most companies levy administration charges from the client in the form of processing fees. Always look for a company with minimum processing fees, when considering variable annuity plans. But it is of common practice that good annuity plans charge higher levies. This is just a sales strategy. There is another charge that you should be aware of. Some variable annuity plans levy fees when withdrawing money before the lock in period.

Optional riders to the policy

Most good variable annuity schemes allow the policy holder to add extra riders so that the policy can be customized to fit individual need. These riders are very similar to those offers by insurance companies on life insurance policies. Variable annuity schemes usually offer many riders and these are different for different companies.

How to find a variable good annuity provider

The best way is to do a thorough survey on the internet. Most companies list their offers and plans detailing all the features and benefits of individual plans. Some websites even have returns calculator to compare different schemes. You can compare the initial purchase cost, withdrawal charges if withdrawn early, average expense, returns on investment and the different mutual fund schemes available. But remember that the returns will ultimately depend on the investment option that you have chosen. So it is important to understand the rate of return of different mutual funds before choosing the variable annuity scheme apt for you.

 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 [...]]]>   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 [...]]]>  Basically, a variable income annuity is a contract between you and an insurance company, whereby the insurer is agreeable to making periodic payments to you. These payments can begin immediately or at some future date. A variable annuity can be bought either by making one single payment, or a series of payments over a specific time.

 Variable income annuities offer a range of investment options, the value of which depends entirely on the performance of the investment options you decide on. Investment options are usually mutual funds that invest in stocks, bonds, and money market instruments, or sometimes a combination of the three.

 Variable income annuities allow you to receive periodic payments for the rest of your life, the life of your spouse, or any other designated person. Although variable annuities are usually invested in mutual funds, they are different to mutual funds in several different ways.

 First of all, they allow you to receive periodic payments for the rest of your life, have a death benefit so that in the event of your death before the insurer has begun making payments to you, your beneficiary will receive a specified amount. Variable annuities are also tax-deferred, which means that you pay no tax on your investment until you actually withdraw the money.

The big thing to remember about variable income annuities is that it is a long-term investment for the sole purpose of meeting long-term and retirement goals. This means that should you withdraw your money early, there are substantial taxes and insurance company charges that you will be faced with.

 The death benefits are a feature of variable income annuities. For instance, when you die, and have selected a person as your beneficiary, be it your spouse or your child, that person will receive all the money in your account, or a guaranteed minimum, whichever is the greater.

 As far as the charges go on variable income annuities, there are several. Make sure that you understand all the charges that are involved, before you invest, as these charges will no doubt reduce the value of your account as well as any returns on your investment.

 Of course, all the information to do with variable income annuity cannot possibly be included in this one article. It is therefore highly recommended that you discuss your intentions with a professional before committing yourself to this long-term investment.

1)    Mortality Expenses: If you purchase a variable annuity, it is most likely going to come with a mortality and expense risk fee. This is a variable annuity fee charged by the insurance company to assume the risk of providing you with guaranteed future payments, taking into account the [...]]]> The commonest variable annuity fees are as follows:

1)    Mortality Expenses: If you purchase a variable annuity, it is most likely going to come with a mortality and expense risk fee. This is a variable annuity fee charged by the insurance company to assume the risk of providing you with guaranteed future payments, taking into account the fact that future unexpected events (such as untimely death) could occur. The insurance company then prices these risks inherent to the structure of an annuity packages it into a charge for the annuitant. This variable annuity fee can range from .50 – 1.5% of the policy value per year.

2)    Surrender charges: A surrender charge is a type of fee an annuitant must pay if he or she withdraws money from the variable annuity under the so-called “surrender period”. This is a set of time that typically lasts between 6 to 8 years and this charge tends to reduce the value of an annuity. Surrender charges were designed by annuity companies to stop an annuitant from cancelling the annuity contract before a set time so that they can recoup whatever costs they have incurred in providing the annuity. The potentially draconian nature of this fee is a good reason why annuitants must study the terms of their variable annuity before signing the contract.

3)    Administrative Fees: These are regular fees that are charged to cater for the cost of administering the variable annuity. These are costs associated with mailings, record keeping, phone calls, fund transfer charges, etc.

4)    Rider Costs: Riders are extra benefits provided by the variable annuity contract in the event of death. These are charged for by the insurance company.

Other variable annuity fees such as contract maintenance fees, premium taxes and investment expense ratios are also charged. The specific fees to be charged are usually contained in the variable annuity contract.

As a general rule, it is good practice to find out how much commission is being paid by the insurance company to the agent who is trying to sell the annuity. These commissions are always built into the variable annuity fees. So the lower the commissions, the less an annuitant can expect to pay in variable annuity fees.