Nationwide, Annexus Add Annuity-Fueled Target Date Funds

Nationwide and Annexus are teaming up to promote in-plan annuities to employer-sponsored retirement plans.

By Allison Bell
This article was originally published by Think Advisor

he companies have joined with Capital Group — the parent of American Funds — to introduce the NCIT American Funds Lifetime Income Builder Target Date Series funds.

The new TDF Series funds come with participant access to a built-in group nonvariable indexed annuity.

The funds in the new TDF Series fund family are structured as investment options provided by a bank-sponsored collective investment trusts, rather than as mutual funds.

The Law

Nationwide, Annexus and Capital Group companies are working to make practical use of features in the Setting Every Community Up for Retirement Enhancement Act of 2019.

Some Secure Act provisions could make in-plan annuities more attractive to sponsors of 401(k) plans and other defined contribution plans.

An in-plan annuitization feature can offer a worker a way to convert a pile of retirement savings into a stream of benefits that could last a lifetime.

The Team

Annexus, a product development company, designed the Lifetime Income Builder annuity at the heart of the new funds.

Nationwide’s Nationwide Fund Advisors division is the official fund family investment advisor.

Nationwide Life Insurance Co., an affiliate of Nationwide Fund Advisors, is writing the annuity. It joined with Annexus to introduce the contract in February.

A separate company, Global Trust Co., is the trustee of the collective investment trust. Global Trust has fiduciary authority over the trust investments.

Capital Group, the fund family giant on the team, is the fourth biggest fund family in the United States, with about $2 trillion in assets under management.

The Product

The product architects have designed the underlying funds to provide annual income that amounts to 6% of the participant’s asset total at the projected retirement start date.

A retirement plan participant using one of the new funds can convert account assets into a stream of income by using a guaranteed lifetime withdrawal benefit that comes with the Lifetime Income Builder annuity.

The guarantee is backed by Nationwide Life, which has an A-plus rating from A.M. Best and from Standard & Poor’s.

An employer or participant might think of the annuity as wrapping the participant’s account value in a protective shield. But Nationwide says the product is different from the existing arrangements known as “wrap” products, because the existing wrap arrangements have had an annuity sitting alongside the participant’s account, with a separate wrap fee.

The new target date fund program has an annuity embedded within the portfolio, with no additional fee, the Nationwide says.

Other insurers have also have annuity news…

Allianz Life

Allianz Life Insurance Co. of North America has introduced a fee-based version of the Allianz Index Advantage Income Variable Annuity.

A product fee that amounts to 0.25% of the charge base and an income benefit fee that amounts of 0.7% of the charge base will be deducted on each quarterly contract anniversary.

The product comes with access to two death benefit options; a menu of crediting rate choices linked to a variety of investment indexes and ETFs, including the Euro Stoxx 50 index and the iShares MSCI Emerging Markets ETF; and a mechanism the holder can use to convert the contract value into a lifetime income stream.

Pacific Life

Pacific Life is using a new line of funds to give holders of some of its traditional variable annuities the ability to make those annuities act like registered index-linked annuities.

The company is giving traditional annuities RILA powers by adding the Invesco V.I. Defined Outcome Funds to the menu of crediting rate linkage choices.

A client who allocates contract value to the new Invesco funds can buffer that value against the first 10% of index-linked losses over a one-year outcome period, Pacific Life says.