An Intelligent Combination - Income Plus, Income Builder and the VIX

Average: 5 (1 vote)

Income Plus and Income Builder are the living benefit riders that accompany the SunAmerica Polaris VA line.

Both appear to be somewhat standard guaranteed minimum withdrawal benefits (GMWBs).

Info on the SunAmerica website is currently unavailable, so the company is presumably in the process of setting / resetting the rates associated with these GMWBs.

The Income Plus rider provides a somewhat lower guarantee rate but also allows for withdrawals to begin as early as age 45.

The Income Builder offers a higher rate if contract owners are willing to defer drawing income for a period of time, and a lower (lower than the Income Plus rate) rate if withdrawals begin at younger ages.

The interesting thing about both living benefit features is that their costs are tied to the Chicago Board of Options Exchange (CBOE) volatility index.

Higher levels of market volatility create higher hedging costs for SunAmerica.  As a result, SunAmerica has tied a proxy for their own hedging costs (the CBOE volatility index) to the actual costs incurred by their customers.

While the living benefit rider costs move up and down with the volatility index, rider costs will not increase more than 25 basis points during the year.

Interesting concept and a move towards greater transparency in a murky industry.

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