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. 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 Athene Ascent Pro Fixed Indexed Annuity. Athene Ascent Pro is a deferred, fixed-indexed annuity that may be a good option if you are looking for lifetime income, the safety of principal, good indexing options, and the most popular riders. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the Athene Ascent Pro Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Rates and Costs Associated with the Athene Ascent Pro Fixed Indexed Annuity
- What Makes This Product Stand Out?
- What I Don’t like
- Company Details
Product Description - Athene Ascent Pro Fixed Indexed Annuity
The Athene Ascent Pro 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 guaranteed lifetime income or plan to leave a legacy for their loved ones, in addition to protecting and growing their retirement savings.
|Product Name||Ascent Pro|
|Issuing Company||Athene Annuity and Life Company|
|AM Best Rating||A (2nd of 13 ratings)|
|Withdrawal Charge Periods||7 and 10 years|
|Maximum Issue Age||80 Years|
|Minimum Initial Purchase Amount||$10,000 ($5,000 in some states)|
|Surrender Charge Schedule||Varies for different tenure policies|
|Crediting Period and Strategies||1-year or 2-year point to point with participation rate or caps, or 1-year fixed with interest rate guaranteed.|
|Plan Types||IRA, Roth IRA, Nonqualified Account, SEP IRA, SIMPLE IRA, 401(a).|
|Indexes||S&P 500 Index, BNP Paribas Multi-Asset Diversified 5 Index, NASDAQ FC Index, AI-Powered US Equity Index, AI-Powered Global Opportunities Index, UBS Innovative Balanced Index|
|Free Withdrawals||10% of the annuity’s Accumulated Value; per year.|
|Death Benefit||Upon the annuitant’s death, the beneficiary can either choose from (i) Accumulated Value (Lumpsum) or (ii) Minimum Guaranteed Contract Value|
|Riders||Need to select a chargeable income rider compulsorily (can choose between two options) Guaranteed GrowthGuaranteed Growth, Plus Interest Credits|
|Surrender Value||Greater of Accumulated Value (less any withdrawal charges/MVA) and the Minimum Guaranteed Contract Value|
The Athene Ascent Pro Fixed Indexed Annuity is almost identical for both policy tenures, except the crediting strategies and surrender charge schedule. For ease of discussion and better clarity, we will discuss the Athene Ascent Pro 7 Fixed Indexed Annuity for the rest of the article.
How does the Athene AscentPro 7 Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 80) can purchase the Athene AscentPro 7 Fixed Indexed Annuity with a minimum initial purchase amount of $10,000, 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 Athene AscentPro 7 Fixed Indexed Annuity offers the annuitant to choose from one or more of the four indexes to determine his earnings crediting formula. Each of these indexes has two strategies each and a fixed-rate guaranteed interest strategy to choose from (making a total of 9 strategy options). We will discuss each available index briefly:
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 Athene AscentPro Fixed Indexed Annuity offers the S&P 500 index with caps in place, meaning that your interest-earning capacity is capped. These rates tend to change frequently; I will discuss more on the rates shortly.
BNP Paribas Multi Asset Diversified 5 Index
The BNP Paribas Multi Asset Diversified 5 Index is a rules-based index that seeks to measure the performance of a diverse range of asset classes comprised of eight components (three equity futures indexes, three bond futures indexes and two commodities index. On a daily basis, the BNPP MAD 5 Index dynamically rebalances the weightings of the components according to a proprietary methodology that seeks to identify weights for the components that would have resulted in the Hypothetical Portfolio with the highest past returns. The BNP Paribas MAD 5 Index was created in January 2016 and targets a 5% annualized realized volatility. The 10-year hypothetical back-tested historical annual return, as shown by BNP Paribas, stands at 4.51% (at the time of writing this article).
NASDAQ Fast Convergence Index
The NASDAQ Fast Convergence Index is powered by BofA (Bank of America) and uses a proprietary technology that aims to reduce risk and increase performance by adapting faster to changing market conditions. It has a 107.95% exposure in the NASDAQ 100 TR Index (which contains 100 of the most prominent large-cap stocks). It is important to know that this index employs a performance control mechanism wherein a portion of the returns of the Nasdaq FC Index is capped at 4% for the preceding one-month period. The NASDAQ FC Index was created in January 2020 and targets a 12.5% annualized realized volatility.
HSBC AI-Powered US Equity Index
The HSBC AI-Powered US Equity Index (AiPEX) is an index developed by HSBC that uses IBM Watson’s AI engine to create a risk-controlled, excess return index comprised of approximately 250 U.S. publicly traded companies, adjusted monthly, that is intended to provide growth through a variety of market conditions. The AiPEX Index was created in August 2019 and targets a 6% daily volatility. The 10-year hypothetical back-tested historical annual return, as shown by HSBC, stands at 5.09%, and the actual return since the index inception stands at 5.37%
AI-Powered Global Opportunities Index
AI-Powered Global Opportunities Index (AiGO) is a multi-asset strategy that uses the power of IBM Watson and Equbot's proprietary Artificial Intelligence capabilities to turn data into investment insight. AiGO is designed to track a strategic combination of a diversified portfolio of ETFs (and one HSBC index) that represents global equities, fixed income, and inflation-sensitive assets in an attempt to deliver resilient market growth across different market cycles. This is a very new index that was launched in March 2023, and it targets a 7% volatility.
UBS Innovative Balanced Index
The UBS Innovative Balanced Index (UBSIBAL) leverages unique signals that aim to provide an early read into the U.S. macro environment and inform an all-weather tactical allocation to equities, commodities and bonds. The signals include US inflation expectations and a Nowcast of US economic growth, generated using key datasets from UBS Evidence Lab, the largest sell-side alternative data offering of its kind. This is also a very new index and applies a volatility control mechanism.
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 3.7%.
Rates and Costs associated with the Athene AscentPro Fixed Indexed Annuity
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 and caps 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 Athene AscentPro rate sheet (as of 4 August 2023) to understand how the earnings are determined.
The first thing to note is that we have seven indexes, and each index has two point-to-point strategies. Additionally, we have a fixed rate strategy to choose from. All in, we get to choose from a total of fourteen strategies (thirteen index-based and one fixed). The company displays three types of crediting strategies across these rates (Participation, Cap, and Fixed). The Participation rate (index allocation rate) and the strategy caps are the most important.
Let’s quickly go through the terminologies described by Athene:
- Participation Rate (PR): Participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 60%, and the index returned 10% over the agreed time. In that case, the annuitant will be eligible for only 60% of the return, i.e., 6%.
- Cap Rates: It means at what rate your interest-earning capacity is capped. For example, if an index returned 12% but the contract’s cap rate is 6%. In this situation, 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.
- Bailout Feature: If Athene lowers the declared 1-year point-to-point index strategy annual cap rate below the Bailout Cap rate, you’ll have full access to your annuity’s accumulated value - free of any charges - for up to 30 days after the contract anniversary in which the Bailout Cap Rate was pierced. After the 30-day Bailout window, all withdrawal charges and MVA will apply.
- Fixed Account Rate: 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 very 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 3.7%.
Thus, it is very important to check rates before choosing your preferred index.
Out of all these indexes, at this point in time, I would prefer the NASDAQ FC index the most because of its decent back-tested returns, good real performance, and relatively high index allocation rate (participation rate) offered by the company.
|Completed Contract Years||1||2||3||4||5||6||7||8+|
|Surrender Charge %||8%||8%||7%||6%||5%||4%||3%||0%|
|Surrender Charge % (in CA)||8%||8%||6.9%||5.8%||4.7%||3.6%||2.4%||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. The surrender charge schedule is different for the different tenures of annuities. For a quick comparison of surrender charges across different products of Athene, you may visit their fixed indexed annuities product page here The surrender charge of Athene AscentPro Fixed Indexed Annuity is pretty much in line with all the other annuity issuers.
The Athene AscentPro Fixed Indexed Annuity levies no annual contract or administrative fees
Riders are one of the main highlights of the Athene AscentPro Fixed Indexed Annuity. The Athene AscentPro Fixed Indexed Annuity comes with an in-built rider that is automatically attached to the policy, and the annuitant has the option to choose from two income growth options.
Athene AscentPro Income Rider – When you purchase the Athene Ascent Pro fixed indexed annuity and income rider, an Income Base is set up for your rider. An Income Base Bonus provides an initial boost.
Your rider’s Income Base is NOT the same as the annuity’s Accumulated Value. The Accumulated Value is available for withdrawal and is used to determine the Cash Surrender Value of your fixed-indexed annuity. On the other hand, think of the Income Base as a value that is used just to calculate your Lifetime Income Withdrawal amount. This value has no cash value or surrender value and cannot be withdrawn in a lump sum.
However, A withdrawal from your Accumulated Value will reduce the rider’s Income Base (and thus the amount of future Lifetime Income Withdrawals) proportionally. For example, withdrawing 10 percent from your Accumulated Value will reduce your Income Base by 10 percent too.
The income base is calculated as follows:
Now, Athene offers two base income crediting options:
- Guaranteed Growth - Your income base is grown at a guaranteed simple interest rate. The income bonus for this option at the time of writing this article was 25%.
- Guaranteed Growth, Plus Interest Credits - Your guaranteed rate will be lower, but your Income Base will also increase by 200 percent of any Interest Credits that are added to your annuity's Accumulated Value. The income bonus for this option at the time of writing this article was 13%.
At the time of writing this article, the rider charges were 1% of the income base, deducted monthly from your annuity’s accumulated and minimum guaranteed contract value.
And the annuitant can choose from one of the above two annual simple interest credit options.
Accessing your Lifetime Income Withdrawal
Your Lifetime Income Withdrawal depends on your income base at the time you start lifetime income withdrawals. Thus, the later you start your lifetime income withdrawals, the more your lifetime income withdrawal amount.
The Athene AscentPro offers three types of Lifetime Income Withdrawals:
- Level Income — Predictable income you can’t outlive
Consider it as a “retirement paycheck” that remains the same and is guaranteed for life.
- Earnings-Indexed Income — An opportunity to grow your lifetime income stream
This option gives you the opportunity to increase your income based on a percentage of the Interest Credits, if any, that are applied each year to your annuity’s Accumulated Value. If you elect this option, you’ll begin with an income amount that’s lower than the Level Income option.
- Inflation-Adjusted Income — The potential to grow your future purchasing power
With this option, you have the potential to increase your income over time based upon movements in the most recently published CPI-U (Consumer Price Index-All Urban Consumers-not seasonally adjusted) inflation index. This may help increase your future purchasing power. If you elect this option, you’ll begin with an income amount that’s lower than the Level Income option.
To calculate the Maximum Lifetime Income, the following formula is used:
Income Base at the time of first withdrawal * Lifetime Income Withdrawal Percentage
The lifetime income withdrawal percentage is based on how late you begin your lifetime income withdrawals and whether you opt for single-life or joint withdrawals. At the time of writing this article, the following Lifetime Income Withdrawal Percentage was applicable (for single life):
For calculating joint life withdrawals, subtract 0.5% from the Single Life withdrawal percentage to determine the Joint Life withdrawal percentage. Joint payouts are based on the Attained Age of the younger life.
Important: Do note that Lifetime Income Withdrawals may be reduced or may stop if you take Excess Withdrawals from your contract. If Excess Withdrawals, Withdrawal Charges, or Market Value Adjustments (MVAs) reduce the contract’s Accumulated Value to zero, your Lifetime Income Withdrawal Payments will stop, and the rider will terminate. If you do not excess withdrawals, your Lifetime Income will continue for the rest of your life, even if your annuity’s accumulated value becomes zero.
Enhanced Income Benefit: If you are ever confined to a Qualified Care Facility, such as a nursing home, your maximum lifetime income withdrawal amount will be doubled until your accumulated value is reduced to zero. Although, you must keep in mind that to qualify for this rider, you must be confined to a Qualified Care Facility for 180 out of the last 250 days. Note that this benefit is not available in CA, CT, DC, HI, ID, IL, MA, MN, NJ, OR, PA, UT, and WA states.
The Athene AscentPro also comes with a Confinement and Terminal Illness Waiver. This no-fee benefit is automatically included for owners providing them a Confinement and Terminal Illness benefit.
Confinement 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. No withdrawal charge or MVA apply 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. No withdrawal charge or MVA apply 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 Athene AscentPro Fixed Indexed Annuity offers some of the features that not many fixed-indexed annuities offer. The ones that I like the most are
- Higher Free Withdrawal Rate
The Athene AscentPro Fixed Indexed Annuity has a free withdrawal rate of 10% of the initial premium or 10% of the annuity’s Accumulated Value; each year. This rate of 10% is higher than what we see in typical accumulation annuities that generally offer only 7% of the contract’s value as free withdrawals.
- Option of Uncapped Strategies
Caps on the equity indexing strategies is a bummer! Strategies with Caps should not be considered true indexing strategies because these Caps limit the earning potential of an index big time. If I choose a good index, but it has a Cap of, say, 4%, then essentially, I am settling for 4% right from the beginning; so why should it be called an “indexing” strategy in the first place?
But, the good thing with the Athene AscentPro Fixed Indexed Annuity is that it provides uncapped strategies for many indexes like BNPP MAD 5 Index, NASDAQ FC Index, and the AiPEX Index. Uncapped strategies are a true way of taking an upside exposure of an index. Although, Participation rates still apply to these indexes.
- Free Enhanced Income Benefit
- Multiple Lifetime Withdrawal Options
- Free Confinement and Terminal Illness Waiver
- No annual contract, mortality & expense, or administrative fees
What I don’t like
I don’t like the following limitations of this annuity.
- The only popular index that this plan offers is the S&P, that too with caps in place.
- A limited number of riders to choose from: Only one compulsory, chargeable rider
- Average Realistic return expectations: You might have known by now that this is an all-rounder policy that offers both growth and protection. As an all-rounder policy, the realistic return expectations are pretty average. It is not the best policy for someone who is looking only for growth and accumulation.
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.
Athene Annuity and Life Company
Athene Annuity and Life Company have been in the business since 2009. It is one of the largest providers of fixed and fixed indexed annuities in the US for many years and has been regularly in the top ten Fixed Indexed Annuity Sales.
It is rated as follows by the rating agencies:
|AM Best||A (2nd of 13 ratings)|
|Fitch||A+ (5th of 19 ratings)|
|S&P||A+ (5th of 21 ratings)|
Athene Annuity and Life Company have managed to maintain decent ratings for many years. It is considered to be strong and stable financially. In 2020, the company paid out nearly $12.6 billion in claims. As of year-end 2020, some of the other financial highlights for Athene Annuity include its:
- $36.7 billion in total sales / direct written premium
- $18.7 billion of total stockholders’ equity
- $1.24 billion in net operating income
- $202.8 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Athene Annuity and Life Company.
On January 1, 2022, Athene Holding Ltd. merged with Apollo Global Management, Inc. (NYSE: APO). Apollo is a high-growth, global alternative asset manager listed on the NYSE that serves institutional and individual investors across the risk-return spectrum in yield, hybrid, and equity strategies.
With the advancement in healthcare and technology, the average American today is living 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 Athene AscentPro is one such annuity that helps you grow your savings with much less risk. Through its Fixed Indexed Annuity and income rider, It offers principal protection and the opportunity to participate risk-free in the market index, providing a stream of guaranteed income and even legacy planning!
If you are considering buying a Fixed Indexed Annuity that works best for Guaranteed Lifetime Income, the Athene AscentPro FIA is a decent product to look after. Although, you must keep in mind that this is an all-rounder annuity and may not be the best suited for people who are exclusively looking for growth and accumulation, and your realistic return expectations should be average!