Nationwide Financial Services Distributors Agency Inc. announced today the introduction of a rider for its variable annuity products sold through banks that gives investors more flexibility to preserve principal from market volatility.
David Giertz, the president of the division of Nationwide Financial Inc. in Columbus, Ohio, that markets through banks, said in an interview Tuesday that the new feature, Capital Preservation Plus Lifetime Income, offers protection, flexibility, and lifetime income.
The rider allows the allocation of money into a variable annuity for a term of five, seven, or 10 years during which the principal and a rate of return are guaranteed, said Mr. Giertz, and it enables customers to take withdrawals of 4% to 7% a year, depending on their age when the withdrawals begin, in payments that are guaranteed for life, even if the contract value reaches zero.
MetLife Inc., Manulife Financial, Jackson National, Lincoln Financial, and Allstate are among the insurers that introduced so-called next generation living-benefit annuities last year, according to Financial Research Corp. in Boston.
The rider helps Nationwide stand apart from competitors because it lets clients make financial decisions at a later date, Mr. Giertz said. "At the end of five, seven, or 10 years, clients can choose what they would like to do with their money in the withdrawal phase," he said. Customers could take the optional guaranteed income withdrawals, keep their money in the annuity, delay withdrawals until a later age, or take out all their money at once.
Mr. Giertz declined to discuss sales expectations or goals for the product but said he expects the rider's flexibility to be received well by bank customers. Nationwide has more than 400 bank relationships, and it sold $2.6 billion of products through financial institutions in 2004.
"The other riders out there don't combine all three [protection, flexibility, and lifetime income] into one solution," he said. "Producers also requested it because they were struggling with the best option for each consumer."
"Many riders make you make decisions that will impact you 10 years or more down the road. We feel this puts the power of decision in the consumers' hands," he said. "In December AARP wrote that major life and family changes occurred for 20% to 30% of workers in the last five years. No one knows where they will be in five, 10 years," he said, so the rider accommodates life changes like birth, death, or divorce.
Nationwide Financial was ranked fourth in bank variable annuity sales in last year's third quarter by Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks sales volume in banks. The insurer was ranked 10th in fixed annuity sales and seventh in the bank channel overall by the Kehrer firm.
The rider will be marketed to people 55 and older, Mr. Giertz said. It is targeted to people in or approaching retirement who are looking for an investment growth opportunity and do not yet need withdrawals.
The rider's cost is set as a daily charge at a rate equal to 0.60% per year. It is applied only during the term.
Mr. Giertz said Nationwide does not have a schedule for introducing products and services but continuously analyzes consumers' needs. In 2003, it introduced an advisory services program that includes separately managed account portfolios, mutual funds, and a no-load variable annuity.
The program was introduced, he said, because the separate account and mutual fund advisory market is expected to better than double this year from its level in 2003.
