Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company promises to credit interest based on the performance of a certain stock market index, such as the S&P 500. Fixed Index Annuities have an inbuilt capital protection feature, so your principal will remain safe even if the index goes down.
Annuities are complex products, and many advisors try to missell them without properly understanding the buyer’s needs. Thus, you must educate yourself on these products and not solely depend upon the annuity agent’s high-pressure sales pitch.
This article discusses an in-depth review of the Allianz Benefit Control Fixed Indexed Annuity. Allianz Benefit Control is a deferred, fixed-indexed annuity that may be a suitable option if you are looking for enhanced lifetime income benefit, the safety of principal, a premium bonus, and multiple withdrawal options. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Allianz Benefit Control Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Product Policy
- Rates and Costs
- Riders
- What Makes This Product Stand Out?
- What I Don’t Like
- Company Details
- Conclusion
Product Description
The Allianz Benefit Control is a Fixed Indexed Annuity (FIA) plan that offers the annuitant (annuity investor) an opportunity to earn a market index-linked return without having to incur the risk of market downside. This is a suitable plan for people who are approaching retirement and aim to grow and protect their retirement savings. This plan is also suitable for people who are looking for a premium bonus, enhanced guaranteed lifetime income, or plan to leave a legacy for their loved ones, in addition to protecting and growing their retirement savings.
Let’s have a look at the high-level fine print of Allianz Benefit Control Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Allianz Benefit Control |
|---|---|
Issuing Company | |
AM Best Rating | A+ (1st of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 80 Years |
Minimum Initial Purchase Amount | $20,000 |
Surrender Charge Schedule | 10-year: 9.30%, 9.30%, 8.30%, 7.30%, 6.25%, 5.25%, 4.20%, 3.15%, 2.10%, 1.05%, 0% |
Crediting Period and Strategies |
|
Plan Types |
|
Indexes |
|
Free Withdrawals | 10% of the annuity’s Accumulated Value; per year |
RMD Friendly | Yes |
Death Benefit | Upon the annuitant’s death, the beneficiary can either choose from:
|
Riders |
|
Surrender Value | Greater of Accumulated Value (less any withdrawal charges/MVA) and the Minimum Guaranteed Contract Value |
Product Policy
How does the Allianz Benefit Control Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the Allianz Benefit Control Fixed Indexed Annuity with a minimum initial purchase amount of $20,000, and in return, he will earn market index returns (calculated through a formula that we will discuss shortly) without having to incur the risk of the market downside, credited as per the chosen crediting period. Apart from the regular crediting period, there are various events that may trigger earnings credit: On free withdrawals, for a long-term care event or terminal illness or injury event, or when a death benefit is payable.
The Allianz Benefit Control Fixed Indexed Annuity establishes two types of accounts during the annuity setup.
Protected Income Value (PIV): Specifically designed for taking enhanced lifetime income withdrawals. The PIV account is only used to determine your lifetime withdrawal amount, and you can’t take this value as a lump sum.
Allianz establishes the PIV on the day your contract is issued, and it equals 100% of the initial premium you pay into your annuity. In addition, the PIV can be credited with two types of bonus: premium bonus and income bonus. Please note that the PIV is only available for lifetime income withdrawals after you have held your contract for at least 10 contract years.
Protected Income Value Premium Bonus: The company credits your PIV with a bonus of 32% on all premiums you place in your contract in the first 18 months.
Protected Income Value Interest Bonus: Allianz Benefit Control plan also offers an interest bonus. The company offers two options for taking an interest bonus.
Option 1: After determining your allocation interest, it is multiplied by the 250% interest bonus factor and credited to your Protected Income Value. So, if your allocations earned 3% interest for the year, the company would actually credit 7.5% interest to your PIV (3% × 250% = 7.5%). However, your accumulated value account is credited by just 50% of the allocation interest. More on this shortly.
Option 2: After determining your allocation interest, it is multiplied by the 150% interest bonus factor and credited to your Protected Income Value. So, if your allocations earned 3% interest for the year, the company would actually credit 4.5% interest to your PIV (3% × 150% = 4.5%). However, your accumulated value account is credited by 100% of the allocation interest vs. 50% in option 1. More on this shortly.
- Accumulation Value - Regular Accumulation Value Offered by Most Annuities: Accumulation value is the amount you can take out of your annuity as a lump sum (less withdrawals, charges for any optional riders you select, any applicable allocation charges and surrender charges, and adjusted by any Market Value Adjustments).
Option 1 vs Option 2 - Which One is Better?
The first question that you need to answer while selecting one of the options is whether you want a series of lifetime payments that you can’t outlive or you plan to withdraw the entire amount as lump sum. Generally speaking, if you are looking for lifetime payments, option 1 is more suitable, while if you plan to withdraw the entire accumulated value as a lump sum, option 2 is more suitable.
Option 1, also known as the "Accelerated PIV interest bonus option," is a strategy that aggressively pursues income savings goals. It uses a 250% protected income value (PIV) interest bonus factor and a 50% accumulation value interest factor. In this approach, any interest earned is multiplied by 2.5 and credited to your PIV. For instance, a 4% interest rate would result in a 10% credit to your PIV. However, only half of any indexed interest is credited to your accumulation value while you're saving, meaning a 4% indexed interest would result in a 2% interest credit to your accumulation value. This option is only beneficial if you plan to take lifetime income withdrawals in the future, as these would be based on the PIV.
Option 2, referred to as the "Balanced PIV interest bonus option," is described as a more balanced approach to pursuing your annuity values. This option uses a 150% PIV interest bonus factor and a 100% accumulation value interest factor. This means that one and one-half times any interest you earn is credited to your protected income value (PIV). For example, if the interest is 4%, it would be multiplied by 1.5, resulting in a 6% credit to your PIV. Additionally, all of any interest you earn is credited to your accumulation value while you're saving. For example, a 4% interest would result in a 4% interest credit to your accumulation value. With this option, your PIV's growth is modest in comparison to option 1, but your accumulation value is a lot higher when compared to option 1. This could be a good choice if you need to take your annuity's value as a lump sum down the road because the lump sum would be based on the accumulation value.
Interest Indexing Options
The Allianz Benefit Control Fixed Indexed Annuity offers the annuitant the ability to choose from one or more of the four indexes to determine his earnings crediting formula. Each index offers multiple indexing strategies, and you can choose multiple crediting strategies based on your preference. The plan also offers a fixed-rate guaranteed interest strategy to choose from. We will discuss each available index briefly:
1. S&P 500 Index
The S&P 500 index is one of the most popular and oldest indexes in the world. It tracks 500 large-cap publicly traded stocks listed in the United States. It is a reliable index and has often succeeded in the test of time. It is very important to note that the Allianz Benefit Control plan consists of cap/participation rates for the S&P 500 index, meaning that you will be credited only a part of the S&P 500 return to your annuity. These rates tend to change frequently; I will discuss the rates in detail shortly.
2. Bloomberg US Dynamic Balance Index II
The Bloomberg US Dynamic Balance Index II reflects the performance of an index strategy that uses the S&P 500 Index and the Bloomberg Barclays US Aggregate RBI Series 1 Index. The S&P 500 Index is a well-established benchmark for U.S. equity markets. The Bloomberg Barclays US Aggregate RBI Series 1 Index is designed to track the Bloomberg Barclays US Aggregate Bond Index —a well-established benchmark for the U.S. bond markets. The Bloomberg US Dynamic Balance Index II was created in August 2015 and targets a low annualized realized volatility, which limits the return potential of the index.
3. PIMCO Tactical Balanced Index
Incorporating a rules-based asset allocation strategy, PIMCO Tactical Balanced Index is designed to provide dynamic exposure to stocks and bonds within a quantitative framework. It aims to provide a stable risk profile through constantly evolving equity and interest rate market environments.
4. BlackRock iBLD Claria Index
The BlackRock iBLD Claria® Index is designed to provide exposure to a diversified global equity portfolio that targets volatility at a predetermined level. The index uses a dynamic process that is rebalanced each day to adjust allocations between the equity and fixed-income baskets. Using historical 20-day and 40-day volatility measures, Index capital moves from the equity basket to the fixed-income basket or back as historical volatility deviates from the target. The Index is constructed from iShares® ETFs.
Note: In addition to allocating the funds in the following indexes, the annuitant also has the option to allocate funds at a fixed interest. These Fixed Rates tend to change from time to time. The Fixed Value Rate at the time of writing this article was 2.90%, which I feel is low compared to other plans that offer similar annuities. This rate may change from time to time and can vary from state to state. You can check out the company's website for the latest rates.
Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of this annuity discussion. It is important to know that we don’t simply get the index return credited to our annuity. There are a few participation rates, caps, and spreads that the company has in place that affect our earnings. The formula to calculate the earnings credited is:
- For Strategies with Participation: (Participation Rate % X Index Return)
- For Strategies with Caps: Index return over a given crediting period with a maximum potential of earning the cap rate
- For strategies with Spreads: Index return less the spread percentage
Let’s have a look at the Allianz Benefit Control Fixed Index Annuity rate sheet (as of 08/06/2024) to understand how the earnings are determined.
We already discussed PIV in an earlier part of this article. Allianz establishes the PIV on the day your contract is issued, and it equals 100% of the initial premium you pay into your annuity. In addition, the PIV can be credited with two types of bonus: premium bonus (bonus on all premiums you place in your contract in the first 18 months) and income bonus (regular interest credit multiplied by income bonus multiplier). The current premium bonus rate is 32%, and the PIV interest bonus rate depends upon the interest bonus option you choose (discussed earlier in this article). Please note that the PIV is only available as lifetime income withdrawals after you have held your contract for at least 10 contract years.
From the above rate chart, you will notice that there are 12 interest crediting options (1 fixed and 11 indexed). Let’s have a look at different terms that are used by Allianz in the Allianz Benefit Control chart rate:
- Participation Rate (PR): The participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 120%, and the index returned 5% over the agreed time. In that case, the annuitant will be eligible for 120% of the return, i.e., 6%.
- Spread: This refers to the rate at which your interest-earning capacity is capped. For example, if an index returns 12% but the contract’s cap rate is 6%, the annuitant will be eligible for an interest credit of 6% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest that can be earned is the cap rate.
- Cap Rates: This refers to the rate at which your interest-earning capacity is capped. For example, if an index returns 12% but the contract’s cap rate is 6%, the annuitant will be eligible for an interest credit of 6% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest that can be earned is the cap rate.
- Monthly Sum: The indexed interest rate for a term year is based on monthly index changes. A monthly index change is determined by comparing the closing index value at the end of that month to the closing value at the beginning of that month. A positive monthly change in a term year is adjusted by applying the monthly cap for that term year. The indexed interest rate for a term year is the sum of the 12 adjusted monthly index changes for that term year. The credited rate will never be less than 0%.
- Fixed Account Rates: If you opt for a fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates usually tend to be low as compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1-year fixed rate on this policy at the time of writing this article was 2.90%., which is not that good compared to other FIA’s fixed-rate offerings.
In my opinion, the S&P 500, Bloomberg US Dynamic Balance Index II, and the PIMCO Tactical Balanced are ideal indexes to choose from. S&P 500 because it offers a decent cap rate on the monthly-sum option (not the best out there, but still okay), and others because they offer an uncapped strategy with slightly higher participation rates. However, it must be kept in mind that except for the S&P 500, all these indexes are volatility control indexes, which limits the true return earning potential of the index. Even the S&P 500 Futures Daily Risk Control 5% Index is a volatility control index and should not be confused with the S&P 500.
Out of the following strategies, I would go with the annual and multi-year point-to-point strategies with participation rates, as they offer higher participation rates. Allianz offers a lower cap rate and high spread rates; Thus, I would not prefer strategies with caps and spreads for the Allianz Benefit Control FIA. Also, the Allianz Benefit Control annuity might be a decent annuity only if you consider its PIV account by opting for lifetime income withdrawals (after you have held your contract for at least 10 contract years). For the regular accumulation account, there are other players, such as Athene and F&G, that offer better growth opportunities.
Index Lock Feature
With both annual point-to-point and MY point-to-point with participation rate crediting methods, you have the ability to manually lock in an index value on any of your individual indexed interest allocation(s) one time at any point during the crediting period.
You may have a high chance of missing out on some of the one-off index gains between the two earnings crediting points. This is where the Optional Free Lock-in features come in handy.
Generally, index gains are automatically locked in at the end of the strategy term, but this feature gives you the option to manually lock index gains once per strategy term. It means you can lock in index gains when you feel that the index is peaked. The following explains the feature graphically.
In this hypothetical example, the index value rose to 111 in month 18, at which time the decision was made to lock in the index value. The beginning index value (100) is compared to the locked index value (111), resulting in a change of 11%. If the participation rate were 80%, the indexed interest for this crediting period would be 8.8% (80% of 11%). By using Index Lock, you are able to lock in the day’s ending index value and be assured a positive index credit for the crediting period - no matter what happens during the remaining months.
This free built-in feature is one of the most liked features of Allianz Fixed Indexed Annuities.
Auto Lock
As another option alongside the manual Index Lock capability, Auto Lock lets you set upper and lower index interest rate percentage targets during each crediting period. The index interest rate percentage target set will be equal to the amount of indexed interest earned after the participation rate is applied.
Surrender Charge
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal that is above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies; although certain charges and penalties may apply. Any amount withdrawn in excess of the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule for Allianz Benefit Control Fixed Index Annuity.
| Completed Years | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 9.30% | 9.30% | 8.30% | 7.30% | 6.25% | 5.25% | 4.20% | 3.15% | 2.10% | 1.05% | 0% |
In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period.
Note that this surrender charge schedule is only valid for the Allianz Benefit Control Fixed Index Annuity product for select states. For complete details about each state, you may visit the product’s brochure.
The surrender charge of Allianz Benefit Control Fixed Index Annuity is pretty much in line with all the other annuity issuers.
Contract/Administrative Charge
The Allianz Benefit Control Fixed Index Annuity levies no annual contract or administrative fees.
Death Benefit
Prior to annuitization, Allianz Benefit Control Annuity gives you two death benefit options. Your beneficiary(s) can receive the greater of the accumulation value, guaranteed minimum value, or cumulative withdrawal amount as a lump sum (this option doesn't include any bonuses). Or, they can receive the Protected Income Value – including the premium and interest bonuses – in payments over a minimum of five years.
Riders
The Allianz Benefit Control Fixed Indexed Annuity comes with a free, built-in Income Multiplier Rider. The Allianz Income Multiplier Benefit rider allows you to withdraw up to double your annual maximum if you become confined to a qualified hospital, nursing facility, or assisted living facility for at least 90 days in a consecutive 120-day period or if you are unable to perform at least two of the six activities of daily living (ADLs).
Accessing Your Money
In an earlier part of the article, we discussed that Allianz creates two accounts when you sign up for the Allianz Benefit Control Fixed Indexed Annuity. One is a regular accumulation account, while the other is the Protected Income Value (PIV) account.
Suppose you want to withdraw your money in lump-sum or through a traditional annuitization route. In that case, you will be entitled to withdraw from your accumulated value (account without any premium or interest bonus). In contrast, if you withdraw your money as a lifetime income payment, you will be entitled to withdraw from your PIV account (with interest and premium bonus).
Income Increase Opportunity through Lifetime Payments Method
When you are ready to begin income withdrawals (anytime after 10 contract years), you can access your PIV in the form of payments that last as long as you live. The initial annual maximum amount is a percentage of your Protected Income Value and is based on your age when payments begin.
| Age | Single Life Payment | Joint Life Payment |
|---|---|---|
50-54 | 3.00% | 2.50% |
55-59 | 3.50% | 3.00% |
60-69 | 4.00% | 3.50% |
70-79 | 4.50% | 4.00% |
80 | 5.00% | 4.50% |
After your lifetime withdrawals begin, your income payments will have the opportunity to increase following each year your contract earns interest, including the 150% interest bonus factor. As long as you don’t take other withdrawals, your payment is guaranteed to never decrease.
What makes this product stand out?
Although Allianz Benefit Control Annuity might not offer the best indexing options, it still offers some features that not many fixed-indexed annuities offer. The ones that I like the most are:
- Multiple Index Options: The Allianz Benefit Control Annuity offers the annuitant to select from four broad market indexes.
- Free Manual and Auto Lock-in Feature: As this is a Fixed Income Annuity, you are naturally protected from market downturns. But you may have a high chance of missing out on some of the one-off index gains between the two earnings crediting points. This is where the Optional Lock-in features come in handy. Generally, Index gains are automatically locked in at the end of the strategy term, but this feature gives you an option to manually lock in index gains once per strategy term. It means you can lock in index gains when you feel that index is peaked.
- Premium and Interest Bonus if you opt for Lifetime Payments
- Free Income Multiplier Rider to double your withdrawals in case you are confined to a qualified hospital, nursing facility, or assisted living facility.
- No Annual Contract, Mortality & Expense, or Administrative Fees
What I don’t like
I don’t like a few things about the Allianz Benefit Control Fixed Index Annuity. Most of them are those that limit the income-earning capacity of an annuitant.
- The accumulated Value Option is Not Lucrative in Terms of Interest-Earning Potential.
- Indexes Offered Come with Volatility Control Mechanism: It must be kept in mind that except for the S&P 500, all the indexes offered by the Allianz Benefit Control are volatility control indexes that limit the true return earning potential of the index.
- Low Realistic Returns: You might have known by now that this is a conservative policy that focuses more on income protection rather than income growth. As a conservative policy, the realistic return expectations are pretty average. It is not the best policy for someone who is looking only for growth and accumulation.
Company Details
You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.
Allianz Life Company
Allianz Life Company has been in business since 1896. It is a subsidiary of Allianz SE, one of the oldest financial services and insurance companies, and has been in the business for over 13 decades. It has been one of the largest providers of fixed and fixed-indexed annuities in the US for many years and has regularly been in the top ten Fixed Indexed Annuity Sales. Allianz SE is a Fortune 500 company.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A+ (2nd of 16 ratings) |
Moody’s | Aa3 (4th of 21 ratings) |
S&P | AA (3rd of 21 ratings) |
Allianz Life Company has managed to maintain decent ratings for many years. It is considered to be strong and stable financially. As of year-end 2023, some of the other financial highlights for Allianz SE include its:
- EUR 14.7 billion in total sales / direct written premium
- EUR 41.4 billion of total stockholders’ equity
- EUR 7.7 billion in net operating income
- EUR 129.1 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Allianz Annuity Life Company.
Conclusion
With the advancements in healthcare and technology, the average American today lives longer than ever. So, it’s very important to have a stream of income that can grow safely and steadily and have the ability to provide a guaranteed income during the retirement years. This not only helps you to mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.
The Allianz Benefit Control Fixed Indexed Annuity is a decent product when it comes to lifetime income withdrawals, offering a few unique features like premium/interest bonuses and Index-locking. However, it may not be the ideal fixed-indexed policy if you are looking for income growth and lumpsum withdrawal. It has a low-income earning potential, and almost all the indexes have low cap and participation rates.
As Allianz is one of the strongest life insurance companies in the world, it may prove to be an ideal policy for a very conservative annuitant who is looking for income protection above anything.