ING Financial Solutions is launching today a new, simplified variable annuity, called ING Select Opportunities, with much lower fees than its flashier, pre-crash offerings.
Most VAs’ total fees fall into the 3.5% to 4% range when active funds are involved, says Bill Lowe, president and head of distribution of ING Financial Solutions. “We’re at 2.25% all in.”
The product features a built-in guaranteed benefit, an annual ratchet feature, and payout is based on when you take income and how old you are. For example, depending on the details of the contract, Lowe says that a 60-year-old drawing income on the annuity at age 65 might qualify for 4% income for the rest of his life. If that customer waits until 70, he might get 5%. “We’re selling this as guaranteed income,” Lowe says.
The death benefit on the annuity is return of principal, and there are no riders available. The new VA’s simplified structure will appeal to more conservative investors who were perhaps leery of VAs’ complicated—and often costly—features in the past, Lowe says. “We used to have enhanced death benefits, income benefits, earnings multiples, rollups on guaranteed withdrawal benefits, but we took all that out,” he says. “We had very competitive riders in every space, but when fees went up the value proposition changed a lot.”
At the same time, the product’s streamlined features lower the company’s exposure to market risk. “Our decision to move into this space is to broaden our markets and create a value opportunity for our customers at a risk level appropriate to ING,” Lowe says.