Indexed Annuities

The MultiChoice Annuity series from Aviva blends features of a traditional fixed annuity with the opportunity to direct premiums among several interest crediting strategies. These strategies offer the potential to earn interest based on upward movements of equity indices, without the downside risks associated with investing directly in the stock market.

“a superior portfolio of Indexed Annuity products”

Aviva's new, innovative, highly competitive MultiChoice Indexed Annuity products offer your clients the choice of up to 6 Indexed Annuities along with 5 index strategies and 1 fixed strategy to choose from , giving them greater opportunity for long term growth through diversification.

Those 7 strategies are:

• 1-Year UNCAPPED Monthly Average
• 1-Year Point-to-Point
• 1-Year Monthly Cap
• 1-Year Point-to-Point Participation
• 1-Year Average Multiple Index - using all three indices: S&P 500, Dow Jones Industrial Average and NASDAQ 100
• Guaranteed One-Year

6 products with 3 surrender periods to choose from:

MCA Income 5 (5 years)...
MCA Income 7 (7 years)...
MCA Income 10 (10 years)...
MCA IncomeElite (10 years)...
MCA Income Plus (10 years/5% Premium Bonus)...
MCA Income Xtra (10 years/10% Premium Bonus)...

Additional Features:

• 10% Premium Bonus Option
• Annuitization is NOT necessary at end of term.
• If annuitization is requested an additional bonus is paid on two of these great products.
• 10% Free Withdrawal of Accumulated Value per year
• 20% Free withdrawal of Accumulated Value (when no withdrawal made in previous year)
• Maximum Issue age 85

Up until very recently, individuals had two choices when it came to annuities: fixed annuities (offering a guaranteed rate) and variable annuities. But in the mid-90s, a third option was introduced that has begun to gain in popularity: the Indexed Annuity.

Index annuities are designed to mirror the performance of a common or well-known index, such as the S&P 500, NASDAQ 100 or the Dow Jones Industrial Average. By tracking a popular index, owners of index annuities can participate in general market changes, while being able to easily track ups and downs in the annuity's value.

Issuers of index annuities always specify the level at which index annuity owners will be "in the market." This level is called the participation rate, and reflects how closely the annuity follows the index's performance. Participation rates are quoted in terms of a percentage. Suppose an index annuity has a defined participation rate of 70%. If the index it follows goes up by 8%, the annuity's accumulated value increases by 5.6%. And in many index annuities, the insurance company mitigates downside risk. Aviva guarantees a 100% participation rate with all Equity Indexed products.

Everyone loves bull markets but when the indices head south, no one likes losing money. Insurers know that all to well. That's why they will often specify "floors" that the annuity cannot go below. For instance, many insurers state that, no matter how the index performs, the annuity owner will never receive less than they originally deposited. Some institutions go one step further and even ensure that the annuity value will always increase in value by a minimum annual interest rate (usually 1-3%). To pay for these promises, any growth comes with a spread. The spread is the difference between what the annuity funds actually earn, and the amount that is credited.

Spreads are not new, and they are not restricted to annuities. When you open a savings account, you are subject to a spread. The bank may be earning 5% on your money, but in a savings account, they're only paying you 1%. In this example, the 4% difference is the spread. In the case of index annuities, the annual spread can range anywhere from 1.5% to 5%, and is clearly reflected both in the initial contract, as well as the statements issued by the insurer. Aviva/AmerUs Life has a spread on only two of seven strategies.

Index annuities are, at their very heart, an annuity. They are tax-deferred, meaning that you don't have to pay taxes on your gains until you actually make a withdrawal. Since they are meant to be used as retirement vehicles, they are designed to be held for the long-term. Withdrawals made by an annuity owner under age 59 1/2 are subject to a 10% penalty by the IRS, as mandated by Congress. Excessive withdrawals made before the index annuity matures can also incur a fee. Insurance companies impose "surrender charges" if annuity funds are withdrawn before the contract expires. Most insurers, though, will allow a certain amount to be withdrawn every year without penalty. Some even allow free withdrawals in the event of a nursing home emergency. Aviva's MultiChoice Indexed Annuities allow a 10% free withdrawal every year of the accumulated value. With some products, Aviva allows a cumulative 20% free withdrawal.

With the surge in popularity of index annuities, more insurance companies have designed their products to be index annuities.

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