Innovative Variable Annuity Designed to Alleviate Investor Tax Pressure

NEW YORK (MainStreet) — There are only $2.6 trillion invested in annuities in the U.S. compared to $18 trillion in mutual funds and managed money assets, according to the Insured Retirement Institute (IRI). But Prudential annuities is aiming to change that with this year's launch of an investment only variable annuity called Prudential Premier Investment that's designed specifically for those investors experiencing increased tax pressures on their investments. 

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“It allows people to defer taxes over time and reposition their investments through tax-free transfers and as their assets appreciate reduce their expenses,” said Bruce Ferris, president with Prudential Annuities Distributors.

Prudential Premier Investment is one of four new product innovations that Prudential has rolled out in 18 months in order to offer saving and income alternatives to CDs and savings accounts.

“Many Americans looking to avoid risk are invested in fixed income paying historically low returns,” Ferris told MainStreet.
Prudential Premier Investment invests in equity and fixed income options, domestic and global strategies and alternative assets. Other recent innovations include the single premium immediate annuity called the Prudential Immediate Income Annuity and the deferred income annuity called Prudential’s Defined Income Variable Annuity.

“In general, single premium immediate annuities offer the highest level of minimum income payments in exchange for a client's premium,” Ferris said. “They offer no cash value and are able to provide a higher level of income due to the predictability of the contracts.”

The single premium immediate annuity product is designed to appeal to women and a broader range of investors.

“Generally women understand that they will outlive their male counterparts but a significant portion of women are not as prepared as they’d like to be for that life changing event,” said Dawn LeBlanc, vice president of product management with Prudential.
Single premium annuities provide an opportunity for investors to maximize their income without exposure to volatility while income from deferred income annuities is delayed to a future date that is typically more than 13 months.

“The income will not be as strong with a single premium immediate annuity due to the risk of a client potentially passing away prior to receiving their income stream however the risks that exist once income begins and the types of holdings used to promise the income are the same as with a single premium immediate annuity,” said Ferris.

Compared to variable annuities, single premium immediate annuities the highest level of minimum income payments in exchange for a client's premium.

“Single premium immediate annuities offer no cash value and are able to provide a higher level of income due to the predictability of the contracts,” Ferris said. “Unlike variable annuities, single premium immediate annuities avoid equity and client behavior risk.”

Instead, the guaranteed income stream comes from using the client's premiums to invest in long duration bonds within the insurance carrier's general account.

Written by Juliette Fairley for MainStreet

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