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.
In this article, we delve into the F&G Performance Pro Fixed Indexed Annuity. The F&G Performance Pro is a deferred, fixed-indexed annuity that could be a viable choice for individuals seeking a fixed-indexed annuity emphasizing tax deferrals, principal protection, and growth, with an option to opt for lifetime income withdrawals. The product features a premium bonus and subsequent roll-up bonuses for growing the income base, allowing for enhanced guaranteed lifetime income options. Following comprehensive due diligence, this report presents an impartial and detailed analysis of this plan.
The review of the F&G Performance Pro Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Rates and Costs Associated with the Performance Pro Fixed Indexed Annuity
- What Makes This Product Stand Out?
- What I Don’t Like
- Company Details
Product Description - F&G Performance Pro Fixed Indexed Annuity
The F&G Performance Pro is a Fixed Indexed Annuity (FIA) that provides the annuitant the opportunity to earn returns tied to a market index, without exposing them to the downside risks of the market. This plan may be particularly fitting for those nearing retirement, who have dual objectives of growing and preserving their retirement savings. A significant unique selling proposition (USP) of this plan lies in its provision for enhanced guaranteed lifetime annual payments, establishing a reliable income stream that cannot be outlived.
Let’s have a look at the high-level fine print of the F&G Performance Pro annuity, and then we will discuss each point in detail.
|F&G (Fidelity and Guaranty Life)
|AM Best Rating
|A- (4th of 13 ratings)
|Maximum Issue Age
|Minimum Initial Purchase Amount
|Surrender Charge Schedule
|14%, 13%, 12%, 11%, 10%, 8%, 6%, 4%, 2%, 1%, 0%
|Monthly point-to-point, 1-year point-to-point with participation rate, 2-year point-to-point with participation rate and spread, or 1-year fixed with interest rate guaranteed
|Nonqualified, IRA, Roth IRA, SEP IRA, SIMPLE IRA, 401(a), Charitable trust.
|S&P 500 Index, BlackRock Market Advantage, Balanced Asset 5 Index, GS Global Factor Index, Barclays Trailblazer Sectors 5 Index, Gold Commodity Index
|10% after the first completed contract year
|Greater of account value or minimum guaranteed surrender value (MGSV)
|Full access to account value (without incurring surrender or MVA charges) in case of: Home Health Care Nursing Home Care Terminal Illness
|The annuitant has to choose Paid Guaranteed Minimum Withdrawal Benefit Rider (GMWB). Optional Performance Enhancement Rider (Will be discussed in the Article)
How does the F&G Performance Pro annuity work?
Any annuitant, up to a maximum issue age of 80, can purchase the F&G Performance Pro annuity with a minimum initial investment of $10,000. In exchange, they will earn returns linked to a market index, calculated through a specific formula that will be elaborated upon later. These returns are credited according to the chosen crediting period. Beyond the standard crediting period, certain events can trigger additional earnings credits: on free withdrawals, for long-term care events, terminal illness or injury events, or upon the payment of a death benefit. Besides the potential for interest growth, the annuity also offers guaranteed lifetime income payments, a feature that will be explored in greater detail in a subsequent section of this review.
The F&G Performance Pro annuity offers the annuitant to choose from one or more of the six indexes to determine the index interest earnings. They are the S&P 500 Index, BlackRock Market Advantage, Balanced Asset 5 Index, GS Global Factor Index, Barclays Trailblazer Sectors 5 Index, and Gold Commodity Index. The annuitant an option to choose from:
- Four crediting strategies from the S&P 500
- Three strategies from the GS Global Factor Index and Balanced Asset Index 5 and
- One strategy each from the Barclays Trailblazer Sectors 5 Index, Blackrock Market Advantage Index, and Gold Commodity Index, making it a total of 13 strategies.
Besides this, it also provides an option to choose from a fixed interest rate of 3.5%. 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 F&G Performance Pro annuity offers the S&P 500 index with participation rates or cap rates in place, 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 more on the rates shortly.
- BlackRock Market Advantage Index: The BlackRock Market Advantage Index is structured to provide an investment portfolio that is both diversified and managed for volatility. The index seeks to outperform traditional multi-asset class benchmarks by balancing investments across five key macroeconomic drivers that influence asset classes' performance, ensuring a more stable risk-adjusted return profile.
Key components of this index include various iShares® ETFs, the iShares S&P GSCI Commodity-Indexed Trust, and cash holdings. The primary aim is to limit risk through a daily volatility-control mechanism. With a 6% Target Volatility, it has the flexibility to leverage up to 125% exposure. 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.
- CIBC Balanced Asset 5 Index: The Balanced Asset 5 Index takes a classic approach to its portfolio construction with a 60/40 allocation. Combined with rebalancing and volatility control features, the index seeks to provide excess returns across market conditions through a tactical combination of equity and fixed-income ETFs.
The Balanced Asset 5 Index was created in June 2020 and targets a 5% annualized realized volatility. 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.
- Barclays Trailblazer Sectors 5 Index: Trailblazer aims to track a diversified portfolio of assets with the highest return potential for a given level of risk. Trailblazer utilizes 14 ETFs that provide diversified exposure to the stock and bond markets, plus a cash component. The ETFs are the growth engines of the portfolio and provide the potential for earning returns. However, since stocks and bonds carry risks, so do the ETFs.
The Barclays Trailblazer Sectors 5 Index was created in July 2016 and targets a 5% annualized realized volatility. 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.
- GS Global Factor Index: The GS Global Factor Index, formulated by Goldman Sachs International, dynamically allocates between Global Equities, influenced by factors like Value and Momentum, and U.S. Bonds, symbolized by 10-year U.S. Treasury Futures. A non-yielding Hypothetical Cash Position is also included. Each month, the Index adjusts asset volatility multipliers based on an economic signal. During rebalancing, it aims for equal risk contributions from assets, adjusting for market indicators. Weights are averaged over ten days and tweaked to meet a 5% Volatility Target with a 150% leverage cap. Again, 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.
- Gold Commodity Index: The Gold Commodity Index tracks the price performance of gold, offering investors a standardized benchmark to measure the market value of this precious metal. Typically composed of gold futures contracts and related financial instruments, such indices reflect the movements in gold prices, influenced by factors like global economic conditions, currency fluctuations, and market demand for gold.
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 3.5%, a similar range to what most other popular fixed-indexed annuities are offering at the time of writing this article.
Rates and Costs Associated with the F&G Performance Pro Fixed Indexed Annuity
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 with the help of your advisor. You can also check the latest rates on their website.
Let’s have a look at the F&G Performance Pro rate sheet (as of 10/11/2023) to understand how the earnings are determined.
The first thing to note is that we have an option to choose between six indexes, and each index has multiple strategies. All in all, it gives us an option to allocate our contract to a maximum of 14 strategies (13 index-based and one fixed). The company displays different types of crediting strategies across these indexes. The index allocation rate (participation rate) and the cap rates are the most important. Let’s understand all the strategies employed by F&G.
- Point to point with Participation Rate: The 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 (generally one-year point-to-point). In that case, the annuitant will be eligible for only 60% of the return, i.e., 6%.
The formula for the same is (Participation Rate % X Index Return).
- Point to point with Cap: Cap rate is the most important terminology in an FIA. It means at what rate your interest-earning capacity is capped. For example, if an index returned 13% but your contract’s cap rate is 7%. In this situation, You will be eligible for an interest credit of 7% only. It doesn’t matter how much the index goes above the cap rate; the maximum interest you can earn is the cap rate.
- Point to Point with Spread and Par Rate: This indexing strategy applies BOTH participation rate and spread to determine the index interest credit. Let’s take an example where the participation rate is 60%, the spread is 2%, and in a given year, the index returned 10%. In this case, the interest credited to the annuity account would be 60% of 10% (PR), less 2% (SP), i.e., 4%. Ideally, You should never opt for the Spread + Participation index crediting strategy.
When allocating premiums in a fixed-indexed annuity, individuals can distribute their money across these different indexing strategies. This means you can decide how much of your premium goes into each strategy, allowing for a tailored approach to potential growth and risk based on your financial goals and comfort level.
Premium Bonus: Receive a bonus of up to 15% on your first-year premium, which will be added to your account value. Also, get a 2.75% annual increase rate for the initial 10 years on your income base, or until you reach 85 years of age, or until you start withdrawing funds. Additionally, you may receive an extra rate contingent on the increase in your account value. The bonus vests over 10 years, 10% at the end of each year. The bonus percentage varies on your age and the state. The below chart reflects current percentages and is subject to change.
Performance Enhancement by Paying Charge: The F&G Performance Pro annuity has the option to enhance performance by paying a charge. Through this, you can opt to increase the Participation Rates and/or reduce the spreads. In the above chart, you will notice that the indexing options with “charge” have higher participation rates or caps when compared to their “no charge” counterparts. At the time of writing this article, this charge was set at 1.25% annually. It is subtracted from the crediting option’s account value at the beginning of the interest crediting period.
The F&G Performance Pro is one of the decent annuities for accumulation. The cap rates that the annuity provides, even on indexes like the S&P 500, are among the highest when compared to other similar annuities that provide an upfront premium bonus. The earnings potential of the F&G Performance Pro annuity is among the highest of all fixed-indexed annuities that are at least A-rated.
If I were to choose the indexing strategies, I would have opted for one or many of the following strategies:
- S&P 500 1-year point-to-point with Cap
- S&P 500 2-year point-to-point with Cap
- Balanced index 1-year point-to-point with participation rate
- GS Global One year point-to-point with participation rate
There are very few Index annuities that have the ability to offer high caps and par rates. However, you must keep in mind that insurance companies tend to change rates frequently, and you must keep an eye on the updated rates. You must consult a trusted financial advisor to know what indexes and strategies suit you best.
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 F&G Performance Pro annuity.
|Completed Contract Years
|Surrender Charge %
Any time a withdrawal incurs a surrender charge, a Market Value Adjustment (MVA) will be made. For withdrawals above the annual penalty-free withdrawal amount for the purpose of a required minimum distribution, F&G will waive any surrender charges and market value adjustments.
Note that this surrender charge schedule is only valid for the F&G Performance Pro annuity product for select states. For complete details about each state, you may contact your trusted financial advisor.
The F&G Performance Pro annuity does not impose any annual contract or administrative fees. Nevertheless, it includes a mandatory Guaranteed Withdrawal for Life Benefit (GWLB) rider, which incurs a cost of 0.10% of the Income Base per year as of the date of this article. This rider cost is very economical considering that most annuities charge between 1.00% to 1.50% for the same. The specifics of the rider are elaborated on in the subsequent section.
The most important part of this annuity discussion is the GWLB rider it comes with. This rider enables you to have a stream of guaranteed lifetime income payments that you cannot outlive.
An income base in the F&G Performance Pro annuity is set up as the foundation for calculating future guaranteed withdrawal amounts. This base grows at a minimum guaranteed compound annual growth rate of 2.75%, regardless of market conditions. However, your income base can grow much faster than that based on the performance of market-linked indexes through your policy’s add-on rate.
Your rider’s Income Base is NOT the same as the annuity’s Account Value. The Account 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. The rider's charge is determined based on your Income Base; however, it is deducted from your account value.
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.
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.
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 influenced by the age at which you commence lifetime income withdrawals, as well as the choice between single-life or joint withdrawals. To illustrate with a hypothetical example, if a client invests $100,000 in this annuity and refrains from making withdrawals for ten years, the income base will ascend to $200,000. If the client is 70 years old when starting lifetime payments, with a 6% lifetime withdrawal rate, they would be entitled to receive 6% of $200,000, which amounts to $12,000 annually for the rest of their life. This holds true even if the account value falls to zero, provided the depletion is not a result of excessive withdrawals. The guaranteed withdrawal percentage is determined at the time the policy is initiated.
Additionally, this rider comes with an impairment multiplier, which is discussed as follows:
Impairment Multiplier: If the annuitant becomes impaired, as defined by the inability to complete two of six activities of daily living (ADLs), and has held the premium in the annuity for a minimum of 10 years without taking withdrawals or starting income, the GWLB rider activates an impairment multiplier. This multiplier doubles the annual payout amount that the annuitant would otherwise receive. For joint annuitants, the increase is by a factor of 1.5 instead of double.
Qualification for Impairment: To qualify for the impairment benefits, specific conditions outlined in the annuity contract must be met. If qualified and the account value is above zero, the annuitant will receive the increased payments due to the impairment multiplier.
Cost of Rider: This incurs a cost of 0.10% of the Income Base per year (as of the date of this article).
Also, as with most annuities, the Performance Pro has free in-built home health care, nursing home, and terminal illness waivers.
Nursing Home 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 60 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.
Home Health Care Waiver: After the first contract year, an annuitant can withdraw up to 100% of the contract’s accumulated value if he is unable to perform at least 2 of 6 activities of daily living (for at least 60 days and is expected to continue for at least 90 days after requesting withdrawal. 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. While many annuities offer Nursing Home and Terminal Illness Waivers, the Home Health Care waiver is not something that many annuities offer.
What makes this product stand out?
The F&G Performance Pro is a good fixed-indexed annuity if your primary goal is getting lifetime income withdrawals. This annuity offers some of the features that not many fixed-indexed annuities offer. The ones that I like the most are:
- Guaranteed and certain growth of income base
The F&G Performance Pro ensures a minimum guaranteed increase in your income base. Regardless of market fluctuations, your income base will expand at least at 2.75% roll-up rates, allowing you to ascertain the minimum amount of your lifetime income payouts at any given moment during the tenure of your annuity.
- Low Rider Charge
The F&G Performance Pro annuity includes a mandatory Guaranteed Withdrawal for Life Benefit (GWLB) rider, which costs 0.10% of the Income Base per year (as of the date of this article). This rider cost is very economical considering that most annuities charge between 1.00% to 1.50% for the same.
- 2X Payments on Impairment
If the annuitant qualifies for impairment and the account value is greater than $0, lifetime income payments will double (or increase by 1.5 times for a joint contract).
- Penalty-free withdrawal on terminal illness or home or nursing care
This no-fee rider is automatically included for the annuity owner at issue and includes a Qualified Nursing Care, Terminal Illness, and Home Health Care waiver.
- Low minimum purchase amount
The minimum purchase amount for this annuity is low at $10,000. Many of the popular annuities available in the market require a high minimum purchase amount of anywhere between $25,000 and $100,000. The low minimum purchase requirement enables even small investors to purchase annuity products.
What I Don’t Like
This product is generally good on all fronts for people looking for income growth; 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:
- High Surrender Charge - The surrender charge of the F&G Performance Pro fixed-indexed annuity is on the higher side when compared to similar annuities in the market. If you think that there is a possibility that you will need to surrender the policy, the F&G Performance Pro annuity may not be the perfect annuity for you.
- Not a Good Annuity for Growth or Accumulation - The Performance Pro may not be the best for growth or accumulation objectives due to its relatively low cap and participation rates, making it less suitable if your aim is to maximize wealth buildup. There are better F&G Annuities if your main goal is accumulation or growth.
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.
Fidelity National Financial
F&G is a subsidiary of Fidelity National Financial. Fidelity National Financial is one of the oldest title insurance companies and has been in the business for over 18 decades. It is a Fortune 500 company ranking #359.
It is rated as follows by the rating agencies:
|A- (4th of 13 ratings)
|A3 (7th of 21 ratings)
|A- (7th of 21 ratings)
|A- (7th of 21 ratings)
Fidelity has managed to maintain strong ratings for many years. Fidelity is considered to be strong and stable financially. As of 2022, the company had $1.8 billion in reserves for claims payment. As of year-end 2022, some of the other financial highlights for Fidelity include its:
- $11.6 billion in total sales / direct written premium
- $47.6 billion of a total investment portfolio
- $1.2 billion in operating income
- $65.5 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with F&G.
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. 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 F&G Performance Pro stands out as an annuity that ensures a secure and predictable income for life, lessening financial risk. It provides a fixed stream of income in your retirement years with benefits such as tax deferral, principal protection, and a market index-linked income option without market risk exposure. For those prioritizing guaranteed and stable lifetime income streams that cannot be outlived, the F&G Performance Pro annuity might be a fitting choice to consider.
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. To delve deeper into our extensive reviews, click here.