Variable Annuity Tiered Pricing Balances Income With Cost

Earlier this month, Jackson National Life Insurance Company introduced new pricing for their variable annuities.  Investment News’ Darla Mercado wrote about the new options in the article “Jackson National unveils tiered pricing for variable annuities.”  The company’s living benefit riders are very popular and they are hoping that this new tiered pricing will be beneficial for consumers looking for more options.  There are five tiers of pricing available with the Lifeguard Freedom Flex and the Lifeguard Freedom 6 Net when they are single life products.  The joint life variable annuities have a new three tiered pricing program.

As the variable annuity sales leader, Jackson National wants to help advisors and clients create a product with their personal needs and goals in mind.  They can look at the different pricing tier levels and base their variable annuity purchase on the benefit that brings them the most value.  Some investors prefer lower pricing while others like the higher withdrawals.  The FreedomFlex and Freedom 6 Net will no longer offer their optional income upgrade.  You could previously pay 25 basis points to opt for 5% income at age 65.  This brought their rider fee to 1.5%.  Now that the income upgrade is a part of Tier 5, it will no longer be an option for the other tiers.  It’s important to note that this feature will not be available until next January.

When Jackson National filed their tier systems with the Securities and Exchange Commission, they said that the system is based on income versus cost.  Level 1 offers the lowest amount of guaranteed income for the lowest cost.  One chart in the Investment News article shows the amount of your guaranteed annual withdrawal percentage based on the age at which you start receiving income.  The percentage of income you will receive increases gradually approximately a percentage point from Level 1 to Level 5.  The article also includes charts with the costs for both variable annuity products based on the five tiers.  The costs increase gradually between tiers, just like the income levels do.

Over the past couple of years, Jackson has made changes trying to decrease 1035 exchanges into their variable annuity products.  With this new tiered pricing, they can better control what money is coming into their products without banning any transfers.  This helps to keep those selling Jackson’s variable annuities happy as well.  Some advisors are disappointed that Level 5 will not be offered for the remainder of this year, but they say that Level 4 is still a very competitive option as well.  Raymond James is not offering their clients Level 1 or Level 2 tiers because they aren’t convinced that the products offer enough value.  But those consumers focusing more on low cost might find value in the lower tiers offered by Jackson National.  If you are interested in a variable annuity from Jackson, make sure that you balance the costs with the income levels to determine which pricing tier will help you reach your goals.

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