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 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
- Product Policy
- Rates and Costs
- Riders
- What Makes This Product Stand Out?
- What I Don’t like
- Company Details
- Conclusion
Product Description
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.
Let’s have a look at the high-level fine print of Athene AscentPro Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Ascent Pro |
|---|---|
Issuing Company | |
AM Best Rating | A+ (2nd of 13 ratings) |
Withdrawal Charge Period(s) | 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 |
|
Plan Types |
|
Indexes |
|
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 |
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 for 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.
Product Policy
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 the ability to choose from one or more of the seven indexes to determine his earnings crediting formula. The S&P 500 Index offers one strategy, and the other six indexes have two strategies each. The plan also offers a fixed-rate guaranteed interest strategy to choose from (making a total of 14 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 the Athene Performance Elite 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 the rates in detail shortly.
2. S&P 500 FC Index
This is the same S&P 500 index but with a volatility control mechanism. Because the index applies a volatility control mechanism, the range of both the positive and negative performance of the index is limited. I would not suggest going with this index as, in its true sense, this index appears similar to the S&P 500 Index, but its returns can vary greatly from the S&P 500 Index.
3. 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.
4. 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.
5. 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
6. AI-Powered Global Opportunities Index
The 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.
7. 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
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 1 July 2022) to understand how the earnings are determined.
The first thing to note is that we have seven indexes, and each index has 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 charge options with each strategy will be discussed shortly. 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: 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.
- 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 S&P 500 index (not the S&P 500 Daily Risk Control) and BNPP Multi-Asset Diversified 5 index the most because of their decent back-tested returns, good real performance, and relatively high index participation/cap rates offered by the company. It's up to you if you are willing to take the additional risk (charge rate) for an additional return (higher participation rates). If the index goes up, your charge rate will be more than covered, but if the index goes down, you will forfeit the charge rate.
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 Athene AscentPro Fixed Indexed Annuity 7.
| 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 Athene products, you may visit their fixed-indexed annuities product page.
The surrender charge of Athene AscentPro Fixed Indexed Annuity is pretty much in line with all the other annuity issuers.
Contract/Administrative Charge
The Athene AscentPro Fixed Indexed Annuity levies no annual contract or administrative fees.
Riders
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 to compulsorily choose the rider by paying the rider charge.
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 accrued value will reduce the rider’s income base (and thus the number 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 the following income crediting option for the income base:
- 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 10%.
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.
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 will be.
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.
2. 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.
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 (in case of single life withdrawal) or 1.5x (in case of joint life withdrawal) until your accumulated value is reduced to zero. However, you must keep in mind that to qualify for this rider position, 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 all states.
The Athene AscentPro also comes with a Confinement and Terminal Illness Waiver. This no-fee benefit is automatically included for owners, providing them with 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 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. 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 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 are 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? However, the good thing about the Athene AscentPro Fixed Indexed Annuity is that it provides uncapped strategies for many indexes like the 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. However, 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, which also has caps in place.
- There is 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.
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.
Athene Annuity and Life Company
Athene Annuity and Life Company have been in the business since 2009. It has been 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:
| Rating Agency | Rating |
|---|---|
AM Best | A+ (2nd of 13 ratings) |
Fitch | A+ (5th of 19 ratings) |
S&P | A+ (5th of 21 ratings) |
Moody's | A1 (5th of 21 ratings) |
Athene Annuity and Life Company has maintained decent ratings for many years. It is considered to be strong and stable financially. As of December 31, 2023, some of the financial highlights for Athene Annuity include its:
- $63 billion in gross organic inflows
- $22 billion of regulatory capital
- $3.1 billion in spread relating earnings
- $320.6 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.
Conclusion
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 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 may be a decent product to look after. However, 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. 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.