Great Product Design

Average: 5 (1 vote)

Fidelity has addressed one of the key flaws that plagues most variable annuity product designs by removing the guaranteed minimum death benefit.

The result is a variable annuity that is significantly less expensive than the vast majority of VAs.

The Fidelity Personal Retirement variable annuity has a M&E charge that is .25 percent or 25 basis points.  The fee for larger investments ($1 million or more) is only 10 basis points.

This is at least a full percent less than the industry norm for mortality and expense charges.

In addition, there are no surrender charges associated with this product.

Not entirely sure whether the lack of surrender charges has anything to do with the removal of the guaranteed death benefit.  May have more to do with the way the product is distributed (through Fidelity) and the associated sales compensation.

In any event, a very intelligent product design.  The presence of death benefits (and the associated costs) is a common criticism among industry analysts.  Many believe it is more efficient to simply buy inexpensive term life insurance for the death benefit.  The popularity of living benefits (most variable annuity products these days are sold with some type of living benefit) is a testament to the interest in and demand for living versus death benefits in VAs.