A Template for Annuity Simplicity
In 2002 I sold several dozen fixed annuities
with ING Life and Annuity, also known as the
International Netherlands Group. At the time
this was one of the 10 largest companies in
the world. At the time CD rates were veary healthy
for savers. I ran a small safe money investment
storefront in Long Beach, California and I was able
to find one year FDIC insured CD's as high as 6% back then.
(Those rates fell shortly afterwards, of course).
But ING had a ten year annuity, I think it was called
the "Max Guarantee", and they were paying an
unbelievable guaranteed rate of return of 7%
on the annuity owners money. It was a
straightforward 7%, just like a CD, and the
client could withdraw their interest whenever they wanted.
So on a $250,000 premium payment, the client was receiving $17,500 of interest annually, or $1,458 / month. At the end of the ten years, their $100,000 was still sitting there for them to reinvest, or the owner could leave it at ING if the Insurers rate was attractive. Simple Math here - over ten years I was able to obtain $175,000 of solid interest payments for these folks.
What is interesting is that few consumers knew anything about this annuity at the time, unless they had an informed advisor. Perhaps the commission was low, I actually forget, but the product was quite obscure at the time. Or perhaps interest rates were comfortable enough that there were simply not enough Ambiguous Annuitants in my orbit at the time.
The Company also had a liberal cancelation feature, and, for a sickness of any duration, the client could withdraw all their monies after only 30 days.
Now, do you think I had any complaints about ING in all this
Do you think I had any cancellations?
Do you think these clients hated "annuities" ?
Unequivocally, no, no and no again!
In fact, I would say that I was performing valuable public
And as the years passed, and the interest rates went to the netherworld, my clients thought I was part of their family..... they were so grateful. In fact, after the ten years were up, in 2012, 100% of those clients decided to keep their funds with ING as the contract guaranteed a minimum 3% rate of return annually, if the client decided to keep their funds resting with ING. Of course, in 2012 interest rates were pretty much where they are today, in the basement, so it was an easy choice for them.
I have no doubt that this was obviously an expensive product for ING to sell. Insurers by law must keep large reserves off to the side when they write contracts as gracious as these.
This is as close as you can get to to a perfect and simple annuity.
And I base a lot of my reviews on this particular example.
In times of higher interest rates, an annuity can lock in some pretty high yields for you. Unfortunately, we cannot create out of thin air real interest that simply does not exist. So today, 2013, Insurers have had to come up with more creative (and confusing) ways of attracting interest in their products, like income riders and death benefit riders.
But in the great scheme of things, this ING annuity was the simplest and best type of annuity program you could get.
A high fixed rate of interest
A Good company
Easy withdrawal privileges
Easy surrender privilieges
Simple to understand.
Hopefully, we will come back to those days soon!