Not so Fast

The first review of the Allianz Alterity variable annuity highlights the benefits of the PRIME Plus living benefit option.

The problem with this living benefit feature--like almost all living benefit features--is that it is so darned expensive that it almost becomes irrelevant unless we return to 1990's style investment returns.

The 7 percent guaranteed annual increase is what it is.

For the PRIME Plus benefit to kick-in, net investment returns must presumably exceed 11 percent.

The reason is that the PRIME living benefit ranges in cost from a minimum of 2.2 percent to a maximum of 2.45 percent.  

Add investment costs to this (minimum .49 percent and max 2.53 percent) and total costs range from minimum of 2.69 percent to maximum of 4.98 percent.

The above does not even contemplate the 6 year surrender charge schedule that starts at 7 percent.

So, assuming middle of the road total expenses (and excluding surrender charges), gross investment returns would have to exceed 10.85 percent for the PRIME benefit to mean anything.  Good luck generating that return with a diversified portfolio.