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. 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 provides an in-depth review of the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity. The Marquis SP Annuity is a single-premium, deferred, fixed-indexed annuity that may be a suitable option if you are seeking tax-deferred growth, principal protection, and guaranteed lifetime income payments. It offers straightforward indexing options that may provide relatively higher returns compared to similar annuities on the market. After extensive research and due diligence, I have prepared a comprehensive and unbiased analysis of this plan.
The review of the Lafayette Life Marquis SP Single Premium 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 Marquis SP Annuity is a single premium, 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 looking for a fixed indexed annuity that provides both growth potential and protection of principal. Additionally, it includes the option for guaranteed lifetime income payments (for a fee), providing a reliable income stream for retirees who prioritize financial security.
Let’s have a look at the high-level fine print of Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Marquis SP Single Premium Annuity |
|---|---|
Issuing Company | |
AM Best Rating | A+ (2nd of 13 ratings) |
Withdrawal Charge Period(s) | 7 and 10 years |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $15,000 |
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 will get the Account Value without any surrender charges |
Free Benefits | Nursing Home Confinement and Terminal Illness Waivers |
Riders | Optional paid guaranteed lifetime withdrawal benefit (GLWB) rider |
Surrender Value | Account Value less any withdrawal charges/MVA |
Minimum Guaranteed Surrender Value | 87.5% of premium paid grown at 2.75% minus withdrawals and enhanced benefit fees |
RMD Friendly | Yes |
The features of the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity remain consistent across both term durations, with the only variations being the rates and the withdrawal charge schedule associated with each term.
Product Policy
How does the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity policy work?
The Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity is designed for flexibility and growth, making it a decent choice for retirement planning. Eligible individuals up to the age of 85 can purchase this annuity with a minimum initial premium of $15,000. In exchange, the annuity provides returns linked to market indexes, calculated using a predefined formula, which we will explore in detail shortly. 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. All these interest credits are credited to a bucket called “Account Value.” This bucket is your annuity account balance, and all your withdrawals take place from it. The annuity also offers an optional paid rider that helps the annuitant secure lifetime withdrawals they cannot outlive. We will discuss this further in the latter section of this annuity review.
The Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity allows the annuitant to choose from one or more of three indexes, S&P 500 Index, J.P. Morgan Strategic Balanced Index, and GS Momentum Builder Multi-Asset Class Index, to determine their earnings crediting formula. The S&P 500 offers two indexing strategies, while the other two indexes offer three strategies each, and the plan also includes a fixed-rate guaranteed interest strategy, providing a total of nine strategy options. We will briefly discuss each available index below.
1. 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, similar to most other annuities, the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity offers the S&P 500 index with cap rates in place, meaning that your interest-earning capacity is capped. These rates change frequently; I will discuss the rates in detail shortly.
2. J.P. Morgan Strategic Balanced Index
The J.P. Morgan Strategic Balanced Index is a rules-based index designed to provide consistent growth with reduced volatility by dynamically allocating between two core components: high-dividend, low-volatility stocks and dynamically rebalanced bonds. The equity component focuses on generating income through dividend-paying stocks while minimizing market risk, while the fixed-income component uses a momentum-based approach to allocate across various bond sectors for stability and enhanced returns. The index targets a 6% volatility level, rebalancing daily to adapt to changing market conditions and maintain its risk profile.
3. GS Momentum Builder Multi-Asset Class Index
The GS Momentum Builder Multi-Asset Class Index is a rules-based index developed by Goldman Sachs that seeks to provide diversified exposure across multiple asset classes, including U.S. equities, international equities, U.S. bonds, international bonds, and commodities. The index employs a momentum-driven strategy, aiming to capture positive trends by analyzing historical data over predefined periods of three, six, and nine months. It rebalances monthly to adjust asset weights based on recent performance, with the goal of enhancing returns while managing risk. To maintain stability, the index incorporates a volatility control mechanism, targeting an annualized volatility of 4.5% and capping it at 5%. This approach seeks to deliver consistent performance across varying market conditions.
While the volatility control mechanisms of the J.P. Morgan Strategic Balanced Index and the GS Momentum Builder Multi-Asset Class Index help reduce market fluctuations, they also limit the potential for upside growth. As a fixed indexed annuity investor, your principal is already protected against downside risk, meaning you are essentially sacrificing upside potential by choosing these indexes. However, the company compensates for this trade-off by offering high participation rates on these volatility-controlled indexes. If you decide to include a volatility-controlled index in your allocation, prioritize the one with the highest participation rate. That said, my personal favorite remains the S&P 500 Index for its overall growth potential.
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 change from time to time. The 1st year Fixed Value Rate for the 7 and 10-year withdrawal charge period at the time of writing this article was 3.55%.
It is very important to note that the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity comes with a cap, participation, and other rates for these indexes, meaning that you will be credited only a part of the index return to your annuity. These rates change frequently; I will discuss more on these rates more shortly.
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, caps, and other rates that the company has in place that affect your earnings. These rates tend to change over time, and the updated rates can always be checked through your trusted financial advisor.
Let’s have a look at the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity (7-year surrender charge) rate sheet (as of December 2024) to understand how the earnings are determined.
| Types of Rates | Rates |
|---|---|
1st Year Fixed Rate | 3.55% |
S&P 500 Index | |
Annual Point-to-point with Cap | 7.75% |
Monthly Average with Cap | 8.25% |
GS Momentum Builder Multi-Asset Class Index | |
3-year Point-to-point with Participation Rate | 255% |
2-year Point-to-point with Participation Rate | 195% |
1-year Point-to-point with Participation Rate | 135% |
J.P. Morgan Strategic Balanced Index | |
3-year Point-to-point with Participation Rate | 182% |
2-year Point-to-point with Participation Rate | 152% |
1-year Point-to-point with Participation Rate | 107% |
From the above rate chart, you will notice that there are 9 interest crediting options (1 fixed and 8 indexed). Let’s have a look at different terms that are used by the company in the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity rate sheet:
- Point-to-point with Participation Rate (PR): The participation rate describes the annuitant’s participation percentage in a return of an index. For example, suppose the participation rate is 150%, and the index returned 4% over the agreed time. In that case, the annuitant will be eligible for 150% of the return, i.e., 6%.
- Point-to-point with 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.
- Monthly Average with Cap Rate: The Monthly Average Strategy calculates interest by averaging the index values at the end of each month during the crediting period and comparing it to the starting index value. If the average index value exceeds the starting value, interest is credited based on this growth, subject to a cap rate. This strategy smooths out market volatility, as the averaging process minimizes the impact of extreme monthly fluctuations. It is ideal for investors seeking steady growth in moderately trending markets, offering a balanced approach to capturing gains while reducing sensitivity to market swings.
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.
My Allocation Recommendation: As per the rate chart referenced in this article, I recommend dividing your allocation among the following strategies for a balanced approach:
- Goldman Sachs 3-Year Point-to-Point: This option offers a high participation rate, making it ideal for capturing substantial growth in trending markets.
- S&P 500 Point-to-Point with Participation: A solid overall choice, leveraging the S&P 500's performance to provide reliable growth potential with the benefit of participation in market gains.
- S&P 500 Monthly Average with Cap: This strategy is best for seeking steady growth in moderately trending markets.
Free Withdrawal and Surrender/Early Withdrawal Charges
Each year, you are allowed a 10% free withdrawal of your contract value without incurring charges, fees, or penalties.
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 Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
10-Year Plan | 9% | 8.5% | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0% |
7-Year Plan | 9% | 8.5% | 8% | 7% | 6% | 5% | 4% | 0% |
Market Value Adjustments - 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 and also changes for some states.
I find the surrender charge of the Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity slightly on the higher side when compared with other similar annuities.
Like most annuities, the Lafayette Life Marquis SP Annuity includes provisions for withdrawals without any charges in certain critical situations, such as a diagnosis of a terminal illness or confinement to a nursing home, hospital, or licensed healthcare facility.
- Terminal Illness Waiver: This waiver allows penalty-free withdrawals if the owner is diagnosed, after the contract is issued, with a life expectancy of 12 months or less.
- Confinement Waiver: This waiver becomes available on or after the first contract anniversary if the owner has been confined to an approved facility for at least 60 consecutive days. It is important to note that the owner must not have been confined at the time the contract was issued.
Guaranteed Minimum Account Value (GMAV) Benefit
The Guaranteed Minimum Account Value (GMAV) Benefit ensures that your account value is protected at the end of the withdrawal charge period. Each withdrawal charge period has its own GMAV benefit, providing a safety net for your investment. At the end of the index year immediately following your withdrawal charge period, Lafayette Life reviews your account value. If it is less than the enhanced value calculated using the GMAV formula, the company increases it to match the enhanced value.
The GMAV is determined by multiplying your initial premium, minus any voluntary reductions, withdrawal charges, and rider fees (if applicable), by the guaranteed enhancement percentage. The applicable percentages are 107% for a 7-year charge period and 110% for a 10-year charge period. This benefit applies one time only, and any increase in value is credited to the fixed interest option.
Contract/Administrative Charge
The Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity does not impose any annual contract or administrative fees. However, it offers an optional Guaranteed Lifetime Withdrawal Benefit (GLWB) rider, which is available for a fee of 0.95% of the benefit base. We will discuss this rider in more detail in the following section.
Riders
The Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity offers annuitants the option to choose an additional paid Guaranteed Lifetime Withdrawal Benefit (GLWB) rider. The Guaranteed Lifetime Withdrawal Benefit Rider in the Oxford Life Royal Select Fixed Indexed Annuity is designed to provide annuitants with a secure stream of income that they cannot outlive. This rider ensures long-term financial stability, particularly during retirement, by offering guaranteed lifetime withdrawals. Below are the key features of this rider:
Lifetime Payout Amount (LPA)
- The Lifetime Payout Amount (LPA) is the guaranteed annual income you will receive for life, calculated as a percentage of the benefit base.
- The withdrawal percentage is determined by the age at which you start withdrawals. The older you are at the time of the first withdrawal, the higher the withdrawal percentage.
- The withdrawal percentage is fixed at the time of policy purchase and increases by 0.10% for each year you delay withdrawals, providing an incentive to postpone withdrawals for a higher income.
- For policies with spousal coverage, the LPA is reduced to 90% of the individual benefit but is guaranteed for as long as either spouse is alive.
Below is the chart outlining the withdrawal percentages based on the age at which withdrawals begin:
| Covered Person’s Age at First Withdrawal | Withdrawal Percentage |
|---|---|
60 | 4.5% |
65 | 5.0% |
70 | 5.5% |
75 | 6.0% |
80 | 6.5% |
85 | 7.0% |
90+ | 7.5% |
Benefit Base and Roll-Up
- The benefit base is a calculated value used solely to determine the Lifetime Payout Amount (LPA). It is not the account value and cannot be withdrawn as a lump sum or transferred.
- The benefit base grows during the first 10 years of the contract through a roll-up feature, provided no withdrawals are made during this period.
- The roll-up percentage is based on the annuitant’s age at the time of purchase, and older annuitants receive higher percentages. This allows the benefit base to grow significantly during the accumulation phase, resulting in a larger LPA when withdrawals begin.
- It is important to note that while the benefit base influences the LPA, it is unaffected by market downturns, ensuring stable income calculations regardless of market volatility. However, since it is not the account value, the benefit base does not reflect the actual cash available for withdrawal or surrender.
| (Younger) Covered Person’s Attained Age | Roll-Up Percentage |
|---|---|
45-60 | 9% |
61-74 | 10% |
75-90 | 11% |
Let’s illustrate how the Guaranteed Lifetime Withdrawal Benefit (GLWB) rider and the benefit base work in practice.
Scenario:
- Initial Premium: $100,000
- Roll-Up Percentage: 10% per year (assumed based on the chart; the actual percentage varies with age)
- Benefit Base Growth Period: 10 years (no withdrawals during this period)
- Age at First Withdrawal: 65
- Withdrawal Percentage: 5.0% (based on age and withdrawal percentage chart)
Step 1: Calculating the Benefit Base
The benefit base is used to determine the Lifetime Payout Amount (LPA). It grows during the roll-up period as follows:
Year 1: $100,000 × 1.10 = $110,000
Year 2: $110,000 × 1.10 = $121,000
Year 10: After compounding 10% annually for 10 years, the benefit base grows to approximately $259,374.
Important Note: The benefit base is not the account value and cannot be withdrawn as a lump sum. It is a reference value solely used to calculate the LPA.
Step 2: Determining the Lifetime Payout Amount (LPA)
At age 65, the withdrawal percentage based on the chart is 5.0%. The LPA is calculated as:
LPA = Benefit Base × Withdrawal Percentage
= $259,374 × 5.0%
= $12,969 per year
This amount is guaranteed for life, even if the account value drops to zero due to market conditions or withdrawals, provided no excess withdrawals are made.
Step 3: Market Downturn Example
If, during the payout period, the account value drops to zero due to market performance or withdrawals (within the LPA limit), the annuitant will still receive the guaranteed $9,935.75 per year for life.
However, if the annuitant withdraws more than the LPA in any year (e.g., $15,000), it could reduce or terminate the GLWB benefit.
Eligibility and Costs
- Withdrawals can begin once the younger covered person turns 60. If both covered individuals are at least 60 at the contract’s start, withdrawals can begin immediately.
- The GLWB rider has an annual charge of 0.95% of the benefit base, which is deducted from the account value. The maximum charge can increase to 1.5%, with prior notice, based on future circumstances.
What Makes This Product Stand Out?
The Lafayette Life Marquis SP Fixed Indexed Annuity offers several unique features and benefits that set it apart from other annuities. Here are the key highlights:
- Diverse Indexing Options: Policyholders can choose from three reputable indexes, the S&P 500 Index, the J.P. Morgan Strategic Balanced Index, and the GS Momentum Builder Multi-Asset Class Index, each offering multiple strategies, along with a fixed-rate option for stability.
- Guaranteed Lifetime Withdrawal Benefit (GLWB) Rider: The optional GLWB rider provides a predictable and reliable lifetime income stream, regardless of market performance. The roll-up feature and age-based withdrawal percentages ensure that policyholders can maximize their retirement income over time.
- No annual contract, mortality & expense, or administrative fees
- Multiple Payout Options: Lump-sum or Annuitization option with Life Only, Life with Period Certain, Joint and Survivor Life, etc.
What I Don’t Like About This Product
While the Lafayette Life Marquis SP Fixed Indexed Annuity has many strong features, there are a few drawbacks to consider:
- Slightly Higher Surrender Charges: The surrender charges for this annuity are slightly higher compared to other similar products in the market. For investors who may need early access to their funds, this can be a disadvantage, especially during the initial years of the contract.
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.
The Lafayette Life Insurance Company
The Lafayette Life Insurance Company is a well-established insurance provider with a rich history spanning over a century. Founded in 1905, the company has maintained a strong presence in the insurance industry, offering a wide range of life insurance and annuity products to individuals and small businesses.
Lafayette Life is headquartered in Cincinnati, Ohio, and is licensed to sell individual life insurance in the District of Columbia and all states except New York. The company is a member of Western & Southern Financial Group (W&SFG), a Cincinnati-based diversified family of financial services companies and a Fortune 500 company.
Lafayette Life offers a comprehensive portfolio of insurance and financial products, including:
- Life Insurance: Whole life, term life, and universal life policies
- Annuities: Various annuity products for retirement planning
- Retirement Services: Qualified plan products and administrative services for small to medium-sized businesses
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A+ |
Fitch | AA |
S&P Global | AA- |
Lafayette Life Insurance Company has managed to maintain decent ratings for many years. It is considered to be strong and stable financially. Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Lafayette Life Insurance Company.
Conclusion
With the advancements in healthcare and technology, the average American today lives longer than ever. So, it’s very important to have a retirement corpus that can grow safely and steadily and have the ability to provide a fixed stream of 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 Lafayette Life Marquis SP Single Premium Fixed Indexed Annuity is a decent product that combines growth potential, financial security, and guaranteed lifetime income options. Its low minimum premium, diverse indexing strategies, and Guaranteed Lifetime Withdrawal Benefit (GLWB) rider make it a good choice for retirees seeking both accumulation and predictable income. While the annuity does have slightly higher surrender charges and fewer optional riders compared to some competitors, its strong core features make it a reliable solution for individuals focused on balancing growth and retirement income.
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.