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No-Load, No Surrender & Low Cost Annuities

When investors use the terms no-load annuity, no-surrender annuity, or even low cost annuity they are actually referring to variable annuities that offer these features.  

No Commission Fees

First, let’s talk about no-load investments in general. A no-load investment is one in which the investor is not charged a commission fee — like a no-load mutual fund. Certain insurance companies offer “no-load” variable annuities, which are sold directly to investors and do not require commissioned sales people or brokers (but can often be purchased through brokers).

No Surrender Charges

Most annuities allow you to withdraw either your interest earnings or up to 15% per year without a penalty. If you want to withdraw more than this, most annuities have a surrender charge — a penalty for making an early withdrawal above the free withdrawal amount. Typically this surrender charge decreases over a period of time, such as seven years.

For investors who may need spur-of-the-moment access to their money, there are annuities without surrender charges (commonly called “no-surrender” or “level load” annuities) — these annuities have no penalty or charge for early withdrawal. (However, be aware that even with a no-surrender annuity investors under the age of 59 ½ are subject to a 10% federal excise tax as well as ordinary income taxes on any gains. You can avoid any taxes or penalties, however, by making a 1035 Tax-Free Exchange to another annuity, regardless of age.)

Note that no-surrender annuities do not come with bonuses.

Low Annual Expenses

Now don’t think that just because a variable annuity is “no-load” there are no fees. Variable annuities have management and mortality and expense (M&E) fees, although usually they are significantly lower than load annuities. While M&E charges can be more than 1.50% with a loaded variable annuity, no-load variable annuity M&E charges may be as low as 0.20%. Portfolio fund management (sub-account) fees associated with no-load variable annuities are about the same as loaded variable annuities, but be aware that loaded variable annuities may charge a 12b-1 fee on all or some funds whereas no-loads typically will not (12b-1 fees are extra fees charged by funds for promotion, distribution, and marketing expenses). View the total fees in the prospectus to see if the variable annuity you are considering contains any 12b-1 fees.


With low annual expenses, no commission fees, and no surrender charges, why doesn’t everyone buy this type of variable annuities? Three main reasons:

  1. No-load annuities do not offer many of the features / riders that make annuities very popular and potentially important to investors. For example, no-load annuities do not offer guaranteed minimum income benefits (GMIBs), lifetime income benefits, or roll-up death benefit provisions.
  2. Service: When you purchase a no-load annuity, you are not getting service from your financial professional. A commission fee is a way of compensating these professionals for their service. Spending time with you discussing your goals and various investment programs, and regular correspondence, are some of the services generally provided in exchange for a commission fee. Investors should ask themselves how much time and effort they require from a financial advisor. If looking for a relatively high degree of support and advice, or features such as income and death benefits, the commission fee, or ‘load’, may be worth it.
  3. Asset Allocation Models: Most no-load variable annuities don’t offer asset allocation models from the likes of Ibbotson, Morningstar, and Standard & Poor’s. Many loaded variable annuities do offer asset allocation models at little or no additional charge. Learn more about asset allocation models.

No-load variable annuities can be desirable for individuals who like to take a hands-on approach with their investments, and who do not need additional features that annuity riders can provide. If you do not need advice or a high level of guidance from a financial agent, and you plan to monitor your investments yourself, these variable annuities may be appropriate for you. If you’re not sure, feel free to call a licensed financial professional for more information

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