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 has an inbuilt feature of capital protection, so even if the index goes down, your principal will remain safe.
There are hundreds of Fixed Index Annuities available in the market today. Different annuities are suitable for different goals of the annuitant, and there is no perfect one-size-fits-all fixed income annuity that can be suitable for annuitants with varied goals.
Annuities are complex products and many advisors try to missell them without properly understanding the needs of the buyer. Thus, it is very important that you should educate yourself on these products and not solely depend upon the annuity agent’s high-pressure sales pitch.
In this article, we will discuss the F&G Accelerator Plus Fixed Indexed Annuity in depth. F&G Accelerator Plus is a deferred, fixed-indexed annuity that may be a good option for annuitants who prioritize growth and safety above any other feature. This annuity offers many indexing options, which can provide good index interest credits to your account. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan.
The review of the F&G Accelerator Plus 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 F&G Accelerator Plus 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. It is a suitable plan for retirees or 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, in addition to protecting and growing their retirement savings. The F&G Accelerator Plus annuity is one of the most popular annuity products of Fidelity and Guaranty Life (F&G) and has been always known for its high earning ability.
Let’s have a look at the high-level fine print of F&G Accelerator Plus annuity and then we will discuss each point in detail.
| Product Name | Accelerator Plus |
|---|---|
Issuing Company | |
AM Best Rating | A- (4th of 13 ratings) |
Tenure | 10 and 14 years |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $10,000 |
Surrender Charge Schedule | Varies for different tenure policies |
Crediting Period |
|
Plan Types |
|
Indexes |
|
Free Withdrawals | 10% after the first completed contract year |
Death Benefit | Upon the annuitant’s death, the beneficiary will get greater of (i) Account Value (ii) Minimum Guaranteed Surrender Value as lumpsum |
Free Bonus |
|
Optional Riders | The annuitant can choose either or both of:
|
Minimum Guaranteed Surrender Value | 87.5% of the premium plus interest credited daily at the MGSV Accumulation Interest Rate |
The F&G Accelerator Plus annuity is identical for both policy tenures except for the earnings rate and surrender charge schedule. For ease of discussion and better clarity, we will discuss the F&G Accelerator Plus 10 annuity for the rest of the article.
Product Policy
How does the F&G Accelerator Plus Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the F&G Accelerator Plus 10 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 F&G Accelerator Plus 10 annuity offers the annuitant the ability to choose from one or more of six indexes to determine their earnings crediting formula. These indexes are the S&P 500 Index, Barclays Trailblazer Sectors 5 Index, Balanced Asset 5 Index, Balanced Asset 10 Index, BlackRock Market Advantage Index, and GS Global Factor Index. The S&P 500 and the Balanced Asset 5 Index offer the annuitant an option to choose from four crediting strategies; the Balanced Asset 10 and GS Global Factor Index each offer three strategies; the BlackRock Market Advantage Index offers two; and the Barclays Trailblazer Sectors 5 Index offers one, making a total of 17 indexed strategies. Additionally, the annuity provides an option to choose a fixed interest rate of 4% as of the time of writing. 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 F&G Accelerator Plus annuity offers a low participation rate for the S&P 500 index, meaning that you will be credited only a small part of the S&P 500 return to your annuity. These rates tend to change frequently; I will discuss more on the rates shortly.
2. 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 CIBC 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
3. Balanced Asset 10 Index
The Balanced Asset 10 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 10 Index targets a 10% 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.
4. 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.
5. 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.
6. 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.
In my opinion, the CIBC Balanced Asset 5 Index is an ideal index to choose from, as it offers a very high participation rate, and back-tested volatility is also low compared to other indexes.
Note: In addition to allocating the funds in the following indexes, the annuitant also has an 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 1%.
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 with the help of your advisor. You can also check out their website for the latest rates.
Let’s have a look at the F&G Accelerator Plus rate sheet (as of 07/08/2024) to understand how the earnings are determined.
-3.2024)&w=3840&q=60)
From the above rate chart, we can see that we have an option to choose indexing strategies from six indexes and one fixed rate. These indexes further have different options for Participation rates, cap rates, monthly sum, performance triggers, and performance enhancements (with charge). So, in total, we have the option to choose our strategies from a total of 17 indexed strategies and one fixed strategy.
- 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.
- 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.
- Annual Declared Rate on Gain (Performance Trigger Rate): A flat or positive index return triggers the declared interest rate to be credited to the contract value. If the index return is negative, no interest is credited, but there will be no loss, and the contract value will remain the same. However, if the change in the value of the index during a particular year is zero or positive, the declared index gain interest rate is multiplied by the option’s account value to determine the index interest credits. The declared interest rate is set at contract issue and applies for the entire withdrawal charge period. In this case, the declared rate on gain for the S&P 500 Index is 5.75%. It means that if the S&P Index doesn’t go negative for a given 1-year period (even if the growth is 0% and not negative), the interest credited to the annuity will be 5.75% irrespective of the S&P 500 actual return. This option is advantageous if you anticipate that the index will experience minimal growth but will not decline.
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.
Performance Enhancement by Paying Charge: The F&G Accelerator Plus annuity has an option to enhance Performance by paying a charge. Through this, you can opt to increase the Participation Rates, Cap Rates, and/or reduce the spreads. In the above chart, you will notice that the indexing options with “charge” have higher participation rates and 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 earnings potential of the F&G Accelerator Plus annuity is among the highest of all fixed indexed annuities that are at least A-rated. Based on the index constituents, past performance, and volatility, some of the good strategies that I believe will give the highest returns are:
- S&P 500 1-year monthly point-to-point with Cap
- S&P 1-year point-to-point with Cap
- Balanced Asset 5 index 1-year point to point with Participation rate and charge
- Balanced Asset 5 index 2-year point-to-point with a Participation rate and charge
- BlackRock Market Advantage 2-year point-to-point with Participation rate
The participation rates with charge (without caps) on the Balanced Asset 5 Index are very generous and I believe the realistic annual return expectations on these rates would be anywhere between 6-10%. There are very few Index annuities that have the ability to offer such high return expectations. However, you must keep in mind that insurance companies tend to change rates frequently, and you must keep an eye on updated rates. You must consult a trusted financial advisor to know what indexes and strategies suit you best.
Enhanced Guaranteed Minimum Withdrawal Benefit (EGMWB)
The most important part of this annuity discussion is the EGMWB rider it comes with. This rider enables you to have a stream of guaranteed lifetime income payments that you cannot outlive.
The Income Base is the value used to determine the Guaranteed Withdrawal Payment and the EGMWB Rider charge. The Income Base is not part of the Policy’s account value and is not used to determine the Policy’s surrender value.
The Income Base is equal to the greater of:
Withdrawal payment amount determined by Income Base at the time payments begin, calculated as the greatest of:
Performance value — equal to the lesser of:
- Premiums paid in policy year one multiplied by the Premium Factor of 5 and
- Total account value (less premiums received after the first policy year) multiplied by the Performance Multiplier.
- The Performance Multiplier at issue is equal to one plus the Performance Factor. The Performance Multiplier increases by the Performance Factor each policy year until the earliest of 10 years, the beginning of the withdrawal period, or age 85. The Performance Factor is 7.5%, and the maximum Performance Multiplier is 175%.
- Roll-up Value - Premiums paid in Policy year 1; growing up to the earlier of ten (10) years or age 85 or the Withdrawal Period begins, with compound interest at the roll-up rate of 5%
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 will be.
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 0.95% of the Income Base per year (as of the date of this article).
Also, as with most annuities, the Accelerator Plus 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.
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 F&G Accelerator Plus 10 annuity:
| Completed Contract Years | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Surrender Charge % | 14% | 13% | 12% | 11% | 10% | 8% | 6% | 4% | 2% | 1% | 0% |
Note that this surrender charge schedule is only valid for the F&G Accelerator Plus 10 annuity product for select states. For complete details about each state, you may contact your trusted financial advisor.
The surrender charge of the F&G Accelerator Plus fixed indexed annuity is on the higher side when compared to similar annuities in the market. If you think that there can be a possibility where you will need to surrender the policy, the F&G Accelerator Plus annuity may not be the perfect annuity for you.
Contract/Administrative Charge
The F&G Accelerator Plus annuity levies no annual contract or administrative fees.
What makes this product stand out?
The F&G Accelerator Plus annuity offers some of the features that not many fixed indexed annuities offer. The ones that I like the most are:
- 10% Premium Bonus: The premium you pay in the first year grows with a vesting bonus. The vesting bonus is 10% for ages 0-75 and 7% for ages 76 and above. F&G adds a percentage of this vesting bonus to your account each year for 10 years as per the vesting schedule.
| End of Policy Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
Percentage | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% |
Once any portion of the premium bonus and any interest credited thereon vests, it becomes part of the vested account value available for surrender or withdrawal.
This bonus is available to all the annuitants without any extra rider charge, but you must note that Bonus annuities may include higher surrender charges, longer surrender periods, lower caps, higher spreads, or other restrictions that are not included in similar annuities that don’t offer a bonus.
2. Uncapped Indexing Options: The F&G Accelerator Plus annuity offers uncapped Indexing crediting strategies on some of the good-performing indexes, such as the Balanced Asset 5 Index. Barclays Trailblazer Sector 5 Index, and so on. Besides this, it also offers a higher participation rate of 100% and above.
The Uncapped Indexing option gives the annuitant an opportunity to earn increased interest rates, without bearing the risk of market downturns.
3. Penalty-free withdrawal on terminal illness or home or nursing care
4. Optional Rider to increase potential returns: The Performance Rate rider helps to Increase cap, participation rate, or replacement rate on available strategies for more accumulation options that can align with a wide variety of goals. But one must keep in mind that it comes with a fixed fee, varied according to the strategy selected.
5. 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 $10,000 and $75,000. 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:
- Low Participation Rate on the S&P 500 Index - The rate sheet mentions that the participation rate on all the strategies of the S&P 500 Index is very low. Even with the low participation rate, the company still applies a high fee when opted for riders. The S&P 500 is the most popular index in the world, and I believe that the annuitant should be given a decent opportunity to participate in the S&P 500 index.
- High Surrender Charge - The surrender charge of the F&G Accelerator Plus fixed indexed annuity is on the higher side when compared to similar annuities in the market. If you think that there can be a possibility where you will need to surrender the policy, the F&G Accelerator Plus annuity may not be the perfect annuity for you.
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.
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 #351 as of 2024.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A (3rd of 13 ratings) |
Moody’s | A3 (7th of 21 ratings) |
S&P | A- (7th of 21 ratings) |
Fitch | 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 the end of 2023, the company had $1.9 billion in reserves for claims payments. As of year-end 2023, some of the other financial highlights for Fidelity include its:
- $13.2 billion in total sales / direct written premium
- $46 billion of a total investment portfolio
- $355 million in net earnings (adjusted)
- $70.2 billion in total assets
Thus, by using the operating history and financial numbers, we can safely gauge that you can trust your savings with F&G.
Conclusion
With advancements in healthcare and technology, the average American today is living longer than ever. Therefore, it’s crucial to have a stream of income that can grow safely and steadily while also providing a fixed, guaranteed income during retirement. This not only helps mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in retirement.
The F&G Accelerator Plus annuity is one such product that helps you grow your savings with less risk. Through its Fixed Income Annuity, it offers principal protection, the opportunity to participate in market index gains risk-free, or a stream of guaranteed income. If you are considering a Fixed Income Annuity with a major focus on growth, the F&G Accelerator Plus annuity is an ideal product 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. Delve deeper into our extensive reviews.