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 Aspida Synergy Choice Bonus Fixed Indexed Annuity. Synergy Choice Bonus is a deferred, fixed-indexed annuity that may be a good option if you are looking for a fixed-indexed annuity that offers tax-deferred growth, a premium bonus, and downside protection with a core focus on income growth. This annuity offers some good indexing options, which have the ability to provide reasonably expected returns in the market. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Aspida Synergy Choice Bonus 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 Aspida Synergy Choice Bonus 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 looking for a fixed-indexed annuity that offers a premium bonus, tax-deferred growth, and downside protection with a core focus on income growth.
Let’s have a look at the high-level fine print of the Aspida Synergy Choice Bonus Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Synergy Choice Bonus |
|---|---|
Issuing Company | |
AM Best Rating | A- (4th of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 80 Years |
Minimum Initial Purchase Amount | $25,000 |
Surrender Charge Schedule | 9%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0% |
Crediting Period and Strategies |
|
Plan Types |
|
Indexes |
|
Free Withdrawals | 10% of the annuity’s Accumulated Value per year |
Death Benefit | Upon the annuitant’s death, the beneficiary will get full account value plus prorated index credits |
Free Benefits |
|
Surrender Value | Account Value less any withdrawal charges/MVA |
RMD Friendly | Yes |
-1200x1205.webp&w=1200&q=100)
Product Policy
How does the Aspida Synergy Choice Bonus Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the Aspida Synergy Choice Bonus Fixed Indexed Annuity with a minimum initial purchase amount of $25,000, and in return, he will earn market index returns (calculated through a formula that we will discuss shortly), 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 Aspida Synergy Choice Bonus Fixed Indexed Annuity offers the annuitant to choose from one or more of the five indexes (S&P 500 Index, Invesco QQQ Growth Index, Nasdaq-100 Index, Goldman Sachs Grand Prix Index, Citi Aria Index) to determine their earnings crediting formula. The S&P 500 index and the Nasdaq-100 index have four strategies, and the other Indexes have two strategies each. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 15 strategy options. We will discuss each available index briefly:
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, similar to most other annuities, the Aspida Synergy Choice Bonus Fixed Indexed Annuity offers the S&P 500 index with par rates and caps in place, meaning that your interest-earning capacity is capped. These rates change frequently; I will discuss the rates in detail shortly.
2. Invesco QQQ Index
The Invesco QQQ ETF, also known as the Invesco QQQ Trust, is a prominent exchange-traded fund (ETF) that tracks the Nasdaq-100 Index. This index comprises 100 of the largest non-financial companies listed on the Nasdaq Stock Market, making the ETF a popular choice for investors seeking exposure to leading technology and innovative companies. Launched in March 1999, the Invesco QQQ ETF has consistently outperformed broader market indices such as the S&P 500, largely due to its focus on high-growth sectors like technology, consumer discretionary, and healthcare. Invesco QQQ is renowned for its high liquidity and is one of the most actively traded ETFs in the United States.
3. Nasdaq 100 Index
The Nasdaq 100 Index is a benchmark stock market index that comprises 100 of the largest non-financial companies listed on the Nasdaq Stock Market. It is heavily weighted towards technology companies, making it a key barometer for the tech industry’s performance. The index includes some of the most influential and innovative companies globally, such as Apple, Microsoft, and Alphabet, and is often used as a proxy for the broader tech sector. Due to its composition, the Nasdaq 100 is known for its volatility but also for strong growth potential, reflecting the rapid pace of innovation and market dynamics in the technology and consumer sectors.
4. Goldman Sachs Grand Prix Index
The Goldman Sachs Grand Prix Index is a dynamic financial index that balances investments between U.S. technology equity futures and U.S. Treasury futures. Utilizing market anomalies and calendar-based signals, the index aims to offer exposure to these two asset classes while maintaining a target volatility of 4.5%. While these volatility controls may result in less fluctuation in rates of return when compared with indexes that don’t use them, they also may reduce the overall rate of return compared with those other indexes.
5. Citi Aria Index
The Citi Aria Index is an equity-focused financial index that dynamically allocates its investments on a monthly basis between two Environmental, Social, and Governance (ESG) underlyings: the Citi Global ESG Index and the Citi US Tech ESG Index. The Citi Aria Index's exposure includes U.S. Tech ESG equity via the Citi US Tech ESG Index, and a global developed markets basket comprising 55% Citi US Large Cap ESG Index and 45% iShares ESG Aware MSCI EAFE ETF.
The Citi Aria Index is aimed at achieving a 20% volatility target level. Additionally, it incorporates a performance control mechanism that caps monthly returns at +4% and floors them at -8%.
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 for the 10-year withdrawal charge period at the time of writing this article was 2.50%. You can view the latest rates of this annuity.
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 rates, caps, and triggers that the company has in place that affect our earnings. These rates tend to change over time, and the updated rates can always be checked on the company’s website.
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
Let’s have a look at the Aspida Synergy Choice Bonus Fixed Index Annuity rate sheet (as of August 2024) to understand how the earnings are determined.
The first thing to note is that we have an option to choose between five indexes, and each index has multiple strategies. All in all, it gives us an option to allocate our contract to a maximum of 15 strategies (14 index-based and one fixed). The company displays three types of rates across all strategies. The index allocation rate (participation rate) and the cap rates are the most important.
- 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 150%, and the index returned 4% over the agreed time. In that case, the annuitant will be eligible for 150% of the return, i.e., 6%.
- 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.
- Fixed Interest Rate: If you opt for a declared strategy / 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/at par 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 2.50%, which is higher than what most fixed-indexed annuities offer.
- Bailout Provision: For the S&P 500 1-year point-to-point strategy with cap, if the company lowers any rate below the Bailout Cap rate, you’ll have full access to withdraw your annuity’s accumulated value - free of any charges or Market Value Adjustments.
Premium Bonus: In addition to the premium you put into your annuity at the beginning, the company credits a 15% premium bonus (age 18-75), which is vested in 10 equal installments over a period of 10 years. Below is the premium bonus vesting schedule. To compensate a bit for lower cap and participation rates, this provides a decent headstart to your annuity account.
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Vested % | 0 | 10 | 20 | 30 | 40 | 50 | 60 | 70 | 80 | 90 | 100 |
However, it's advisable to approach the premium bonus with caution. While the Aspida Synergy Choice Bonus Fixed Indexed Annuity provides an initial premium bonus, its cap and participation rates are lower compared to Aspida’s other product, the Aspida Synergy Choice Max. Although future market returns are unpredictable, you should consider opting for this annuity only if you expect future market returns to be consistently lower than the highest cap rate offered by the annuity. In general, it's advisable to choose an annuity with higher cap rates.
Amongst these indexes, I would prefer to invest in the following strategy options because of the higher participation and/or cap rates:
- Invesco QQQ 1-year point-to-point with cap rate
- S&P 500 2-year Point-to-point with Cap Rate
- GS Grand Prix 2-year Point-to-point with Participation Rate
Surrender/Early Withdrawal 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 the Aspida Synergy Choice Bonus Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
|---|---|---|---|---|---|---|---|---|---|---|---|
10-Year Plan | 9% | 9% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0% |
Market Value Adjustments - 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. The surrender charge schedule is different for the different tenures of annuities and also changes for some states.
The surrender charge of the Aspida Synergy Choice Bonus Fixed Indexed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Aspida Synergy Choice Bonus Fixed Indexed Annuity levies no annual contract or administrative fees.
Riders
The Aspida Synergy Choice Bonus is a plain-vanilla annuity that does not offer any optional paid riders. In my opinion, this actually appeals to many people who don’t understand or do not want to dive deep into the complex methodologies the riders often come up with. However, as with most annuities, the Aspida Synergy Choice Bonus has free in-built nursing home and terminal illness waivers.
Extended Care Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is confined to a Qualified nursing home for at least 90 consecutive days. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
Terminal Illness Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is diagnosed with a terminal illness with a prognosis of 12 months or less. No withdrawal charge or MVA applies if the owner qualifies for this benefit. Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
What makes this product stand out?
The Aspida Synergy Choice Bonus Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
- Premium Bonus: In addition to the premium you put into your annuity at the beginning, the company credits a 10% premium bonus, which is vested in 10 equal installments over a period of 10 years.
- The plan offers the S&P 500 Index with good caps and participation rates, allowing you to grow your retirement account faster.
- No annual contract, mortality & expense, or administrative fees
- Free Confinement and Terminal Illness Waiver Benefit
- Multiple Payout Options: Lumpsum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I Don’t Like
This product is decent for people looking for growth and safety; still, there are some features that I believe could add more value for the annuitant. Some of the features that I don’t like about the policy are:
- Although the annuity offers good strategies on the S&P 500, Nasdaq-100, and Invesco QQQ Index, I don’t like the other indexes that the company offers. These indexes have a volatility control mechanism that limits the overall return of the index. However, at the time of writing this article, the company is offering a good participation rate on those indexes to compensate for the low potential return.
- I couldn’t find the Minimum Guaranteed Surrender Value (MGSV) rate on the marketing material of this annuity.
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.
Aspida Life Insurance Company
Aspida Life Insurance Company, established in 2021, stands as a relatively new entrant in the life insurance and annuity market. It functions as a direct subsidiary of Aspida Holdings Ltd., which concentrates on offering retirement and reinsurance solutions and is backed by a leading global alternative investment manager, Ares Management Corporation. Aspida distinguishes itself by prioritizing the use of technology and agility to support its clients in realizing and safeguarding their aspirations.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A- (4th of 13 ratings) |
KBRA | A- |
These ratings mean that the company is considered to be strong and stable financially. As of year-end 2023, some of the financial highlights for Aspida Life Insurance Company include its:
- $15.1 billion in assets under management
- $1.3 billion of total GAAP equity
- $428 billion in parent company’s (Ares Management Corporation) assets under management
- 35 global offices
Conclusion
With advancements in healthcare and technology, the average American today lives longer than ever. Consequently, it's crucial to have a source of income that grows safely and steadily, and can provide a guaranteed income during retirement years. This strategy not only mitigates the risk of outliving your income but also ensures a decent standard of living in retirement.
The Aspida Synergy Choice Bonus is an annuity designed to safely grow your savings. It offers faster growth with principal protection through its premium bonus and relatively higher caps/participation rates. The product's straightforward nature, devoid of optional paid riders, might actually appeal to those who prefer simplicity over complex rider methodologies. If you're considering a Fixed Indexed Annuity that offers a premium bonus and is focused on accumulation, the Aspida Synergy Choice Bonus Fixed Indexed Annuity could be a worthy option. Although Aspia is a relatively new entrant in the annuity market, it has received favorable ratings from established rating agencies. To compensate for its newcomer status and to attract customers, Aspia is offering higher rates compared to other annuity providers.
We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. Delve deeper into our extensive reviews.