F&G Accelerator Plus Annuity Review

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.

How does the F&G Accelerator Plus annuity 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 to chose from one or more of the three indexes to determine his earnings crediting formula. They are the S&P 500, Barclays Trailblazer Sectors 5 Index, and CBIC Balanced Asset 5 Index. The S&P 500 offers the annuitant an option to chose from four crediting strategies, two from Barclays Trailblazer Sectors 5 Index, and two from the CBIC Balanced Asset 5 Index (making it a total of 8 strategies). Besides this, it also provides an option to choose from a fixed interest rate of 1% (it’s too low). 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 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.

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. The 5 years historical annual return from 2016-2021 as shown by Barclays stands at 3.62%.

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 CIBC Balanced Asset 5 Index was created in June 2020 and targets a 5% annualized realized volatility. The hypothetical back-tested historical annual return from 2003-2020 as shown by CIBC stands at ~4.00%.

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 associated with the F&G Accelerator Plus 10 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 with the help of your advisor.

The F&G uses four crediting strategies:

Point to point with Participation Rate

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%. 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

Spread is the percentage of the index return that the insurance company will deduct from your interest calculation. For example, if the spread in the contract is 2% and the index returned 8%, you will be eligible for the return minus the spread (8% – 2%), i.e., 6% of the return.

Annual Declared Rate on Gain

If the change in the index value is zero or negative, no indexed interest is added. If the change in the value of the index during that 1-year period is positive, the declared index gain interest rate is multiplied by the option’s account value to determine the index interest credits. The index interest credits pursuant to this option will never be less than zero.

Now, these strategies can be mixed and matched with different indexes, tenures, and Performance Rate Rider. For example, you can select the S&P 500 Index with a 1-year annual point-to-point with Participation rate, or the same with a 1-year monthly point-to-point with Cap or 1-year declared rate on gain, and so on.

Performance Enhancement by paying charge: The F&G Accelerator Plus annuity has a Performance Enhancement rider through which you can opt to increase the Participation Rates, Cap Rates, Declared Rates, and/or reduce the spreads.

Let’s have a look at the rate chart of the F&G Accelerator Plus annuity to better understand the earnings crediting strategies. Note that these rates are updated as of July 2021. These rates tend to change. Contact your investment advisor to know the latest rates of the F&G Accelerator Plus annuity.

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.

How does the F&G Accelerator Plus annuity 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 to chose from one or more of the three indexes to determine his earnings crediting formula. They are the S&P 500, Barclays Trailblazer Sectors 5 Index, and CBIC Balanced Asset 5 Index. The S&P 500 offers the annuitant an option to chose from four crediting strategies, two from Barclays Trailblazer Sectors 5 Index, and two from the CBIC Balanced Asset 5 Index (making it a total of 8 strategies). Besides this, it also provides an option to choose from a fixed interest rate of 1% (it’s too low). 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 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.

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. The 5 years historical annual return from 2016-2021 as shown by Barclays stands at 3.62%.

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 CIBC Balanced Asset 5 Index was created in June 2020 and targets a 5% annualized realized volatility. The hypothetical back-tested historical annual return from 2003-2020 as shown by CIBC stands at ~4.00%.

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 associated with the F&G Accelerator Plus 10 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 with the help of your advisor.

The F&G uses four crediting strategies:

Point to point with Participation Rate

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%. 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

Spread is the percentage of the index return that the insurance company will deduct from your interest calculation. For example, if the spread in the contract is 2% and the index returned 8%, you will be eligible for the return minus the spread (8% – 2%), i.e., 6% of the return.

Annual Declared Rate on Gain

If the change in the index value is zero or negative, no indexed interest is added. If the change in the value of the index during that 1-year period is positive, the declared index gain interest rate is multiplied by the option’s account value to determine the index interest credits. The index interest credits pursuant to this option will never be less than zero.

Now, these strategies can be mixed and matched with different indexes, tenures, and Performance Rate Rider. For example, you can select the S&P 500 Index with a 1-year annual point-to-point with Participation rate, or the same with a 1-year monthly point-to-point with Cap or 1-year declared rate on gain, and so on.

Performance Enhancement by paying charge: The F&G Accelerator Plus annuity has a Performance Enhancement rider through which you can opt to increase the Participation Rates, Cap Rates, Declared Rates, and/or reduce the spreads.

Let’s have a look at the rate chart of the F&G Accelerator Plus annuity to better understand the earnings crediting strategies. Note that these rates are updated as of July 2021. These rates tend to change. Contact your investment advisor to know the latest rates of the F&G Accelerator Plus annuity.

Accelerator Plus 10 and Accelerator Plus 14 rate charge as of July 2021

From the above rate chart, we can see that we have an option to chose indexing strategies from three indexes, and one fixed rate. These indexes further have different options for Participation rates, cap rates, declared rates, and performance enhancements (with charge). So, in total, we have an option to chose our strategies from a total of 16 indexed strategies and 1 fixed strategy. The performance enhancement rider charge is 1.25% of the strategy’s account value and will be deducted from the vested account value at the beginning of each index crediting period.

Now, this is why we chose the F&G Accelerator Plus annuity as the best Indexed Annuity for annuitants who give the most importance to growth. 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 and Charge
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
Balanced Asset 5 index 1-year point to point with Participation rate and charge

The participation rates (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. But, you must keep in mind that insurance companies tend to change rates frequently and you must keep watch on the 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 EGMWB Rider provides you with the ability to receive guaranteed withdrawal benefits for your life (or the lives of you and your spouse) or where an owner is a non-natural person, the life of the annuitant (or joint annuitant). This benefit is called the Guaranteed Withdrawal Payment.

The charge for the EGMWB Rider is 1.15% of the Income Base deducted from the account value on each Policy anniversary.

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:

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%; or
Guaranteed Minimum Withdrawal Performance Value.

The Guaranteed Payout is equal to {Income Base} X {Guaranteed withdrawal Percentage}. The Guaranteed withdrawal percentage is established during the time you sign up for the policy.

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 forF&G Accelerator Plus 10 annuity

In case you need to surrender your policy, your contract value will be calculated assuming a Minimum Guaranteed Interest Rate (MGIR) of 1% for the period you held the policy.

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:

5% Premium Bonus

The premium you pay in the first year grows with a vesting bonus. The vesting bonus is 5% for ages 0-75 and 3.25% 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.

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.

Uncapped Indexing Options

The F&G Accelerator Plus annuity offers uncapped Indexing crediting strategies on some of the good performing indexes such as the CIBC Balanced Asset 5 Index. 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.

Penalty-free withdrawal on terminal illness, or home or nursing care

This no-fee rider is automatically included for owners under age 75 at issue and includes both a Qualified Nursing Care and Terminal Illness Benefit:

Qualified Nursing Care Benefit

After the first contract year, additional free withdrawal of up to 100% of the contract value is allowed if the owner is confined in a qualified care facility for a minimum of 60 days. Confinement must begin after the contract issue date and written proof is required from both the qualified care facility and recommending physician.

Terminal Illness Benefit

After the first contract year, additional free withdrawal of up to 100% of the contract value is allowed if the owner is diagnosed with a terminal illness. Diagnosis must occur after the contract is issued and written proof with supporting documentation is required from a qualified physician.

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.

Minimum Guaranteed Income Rate

In case you need to surrender your policy, your contract value will be calculated assuming a Minimum Guaranteed Interest Rate (MGIR) of 1% for the period you held the policy.

Low minimum purchase amount

The minimum purchase amount for this annuity is low at $,000. Many of the popular annuities available in the market require a high minimum purchase amount of anywhere between $10,000 to $25,000. 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.

A limited number of riders to choose from

The F&G Accelerator Plus annuity doesn’t offer any enhanced living or death benefit riders, so, it may not be useful for people who are sure that they will need a guaranteed income stream from this annuity.

No free withdrawal in the first year

You must keep this term in mind while purchasing the F&G Accelerator Plus annuity.

What’s modified in the revamped version?

The F&G Accelerator Plus annuity was revamped in July 2021. In the revamped version, it included the CIBC Balanced Asset 5 Index in its indexing strategies; with and without performance rate rider.

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.

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 #472.

It is rated as follows by the rating agencies:

Fidelity has managed to maintain strong ratings for many years. Fidelity is considered to be strong and stable financially. As of 2020, the company had $1.7 billion reserves for claims payment. As of year-end 2020, some of the other financial highlights for Fidelity include its:

$11 billion in total sales / direct written premium
$38 billion of a total investment portfolio
$1.4 billion in operating income
$50.5 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

Conclusion

With the advancement in healthcare and technology, an average American today is living longer than ever. So, it’s very important to have a stream of income that can grow safely, steadily and have the ability to provide a fixed 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 F&G Accelerator Plus annuity is one such annuity that helps you grow your savings with less risk. Through its Fixed Income Annuity, It offers principal protection, or the opportunity to participate risk-free in the market index, or providing a stream of guaranteed income. If you are considering buying a Fixed Income Annuity, with a major focus on growth, the F&G Accelerator Plus annuity is an ideal product to look after.