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 Nassau Bonus Annuity Plus Fixed Indexed Annuity. The Nassau Bonus Annuity Plus FIA is a relatively new indexed annuity that may be a suitable option for those seeking an initial “boost” to their account value through a 16% premium bonus. It is designed for annuitants focused on accumulation, tax-deferred growth, and principal protection. The annuity offers several indexing options that have the potential to deliver reasonable returns in line with market performance. After conducting extensive research and due diligence, I present an unbiased and thorough analysis of this product.
The review of the Nassau Bonus Annuity Plus 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 Nassau Bonus Annuity Plus is a Fixed Indexed Annuity (FIA) that provides annuity investors the opportunity to earn returns linked to a market index without the risk of market downturns. This plan is well-suited for individuals seeking a fixed indexed annuity that offers an initial “boost” to their account value, with a focus on accumulation, tax-deferred growth, and principal protection.
Let’s have a look at the high-level fine print of the Nassau Bonus Annuity Plus Fixed Indexed Annuity, and then we will discuss each point in detail.
| Product Name | Bonus Annuity Plus |
|---|---|
Issuing Company | Nassau Life and Annuity Company |
AM Best Rating | B++ (5th of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Maximum Issue Age | 85 Years |
Minimum Initial Purchase Amount | $15,000 |
Crediting Period and Strategies |
|
Plan Types |
|
Indexes |
|
Free Withdrawals | 5% of the annuity’s Accumulated Value per year. Unused free withdrawals percentage can be carried forward to a maximum withdrawal percentage of 25% |
Death Benefit | Upon the annuitant’s death, the beneficiary will get greater of (i) Account Value or (ii) Surrender Value |
Free Benefits |
|
Riders | Compulsory paid enhanced benefit rider for premium bonus, liquidity rollover feature, and early return of premium surrender benefit |
Surrender Value | Account Value less any withdrawal charges/MVA |
Minimum Guaranteed Surrender Value | 87.5% of premium paid grown at Total Guaranteed Value (TGV) interest rate minus withdrawals and enhanced benefit fees |
RMD Friendly | Yes |
Product Policy
How does the Nassau Bonus Annuity Plus Fixed Indexed Annuity policy work?
Any annuitant (maximum age at the time of policy issue: 85) can purchase the Nassau Bonus Annuity Plus fixed indexed annuity with a minimum initial purchase amount of $15,000, and in return, they 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. 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. A 16% premium bonus (for ages less than 81) is added to all premium payments made within the first 60 days of the annuity issue, and this bonus vests over a period of 10 years.
The Nassau Bonus Annuity Plus Fixed Indexed Annuity offers the annuitant to choose from one or more of the three indexes (S&P 500 Index, Nasdaq-100 Index, and Smart Passage SG Index) to determine their earnings crediting formula. The Smart Passage SG Index has 8 crediting strategies, the S&P 500 index has 5 crediting strategies, and the Nasdaq-100 has 4 strategies. The plan also offers a fixed-rate guaranteed interest strategy to choose from, making a total of 18 strategy options. We will discuss each available index briefly:
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 Nassau Bonus Annuity Plus Fixed Indexed Annuity offers the S&P 500 index with cap rates and participation rates in place, meaning that your interest-earning capacity is capped. These rates change frequently; I will discuss the rates in detail shortly.
2. Smart Passage SG Index
The Smart Passage SG Index, developed by Société Générale, is a rules-based equity index designed to outperform the S&P 500 by focusing on low-volatility stocks. Each month, the index selects the 200 least volatile stocks from the S&P 500, assigning greater weight to those with lower volatility. To manage risk, it employs a volatility control mechanism targeting a 16.5% volatility level, adjusting exposure to the core portfolio accordingly. This systematic approach aims to leverage the "Low Volatility Anomaly," where lower volatility stocks have historically outperformed higher volatility ones on a risk-adjusted basis. However, while this mechanism helps in reducing volatility, it also reduces the potential for significant upside gains.
3. Nasdaq-100 Index
The Nasdaq-100 Index is a market capitalization-weighted index comprising 100 of the largest non-financial companies listed on the Nasdaq Stock Market. It includes a diverse range of sectors, such as technology, healthcare, consumer discretionary, and industrials, with a significant tilt toward tech-heavyweights like Apple, Microsoft, and Amazon. The index serves as a benchmark for growth-focused investments and is renowned for its emphasis on innovation-driven companies.
It is very important to note that the Nassau Bonus Annuity Plus Fixed Indexed Annuity comes with cap rates and participation 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.
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 10-year withdrawal charge period at the time of writing this article was 3.10%.
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 on the company’s website.
Let’s have a look at the Nassau Bonus Annuity Plus Fixed Index Annuity rate sheet (as of November 2024) to understand how the earnings are determined.
From the above rate chart, you will notice that there are 18 interest crediting options (1 fixed and 17 indexed). Let’s have a look at different terms that are used by the company in the Nassau Bonus Annuity FIA chart rate:
- 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.
- Sunrise with Participation Rate: The Sunrise with participation rate strategy utilizes a unique approach to calculate index credits based on the Smart Passage SG Index. For the 1-year and 2-year indexed accounts, the percentage change in the index is measured after applying the “Sunrise Adjustment,” which excludes the best monthly return for each year in the segment. This adjusted growth rate is then multiplied by the participation rate declared at the start of the segment to determine the account credit. These accounts may offer higher participation rates compared to other indexed accounts, making them attractive for potential growth. However, the Sunrise Adjustment, by excluding the top-performing months, limits the overall index credit. Consequently, these accounts are likely to underperform if significant annual growth is concentrated in a single month for 1-year segments or one month per year for 2-year segments. This feature makes them better suited for scenarios where index growth is steady and evenly distributed.
- Fixed Account Rate: If you opt for a fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates are usually low/at par as compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1-year fixed rate on this policy at the time of writing this article was 3.10%.
- Enhanced Index Options: Enhanced Index Options offer annuitants the opportunity to benefit from higher crediting rates, such as increased cap or participation rates, in exchange for an additional annual fee. This fee is calculated by applying an enhancement fee rate to the index account value at the start of the term and is deducted at the end of the term. The initial enhancement fee rate is fixed at the contract issue and guaranteed for the first index term, with a new rate declared at the beginning of each subsequent term. For example, by opting for an Enhanced Index Option with an annual fee of 1.00%, an annuitant can access an enhanced participation rate of 65% on the 2-year S&P 500 point-to-point strategy, compared to the standard participation rate of 48%. This allows for potentially higher returns, depending on the performance of the selected market index.
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.
Among these indexes, I prefer the 2-year S&P 500 Index point-to-point participation rate strategy with an enhanced participation option, the 1-year S&P 500 with a cap rate, or even the 2-year Sunrise Smart Passage SG with an enhanced participation option. I would avoid the Nasdaq-100 indexing option due to the low participation rates offered.
Initial Premium Bonus
In a fixed indexed annuity (FIA), the initial premium bonus is a percentage of the amount you invest, added to your account value at the time of purchase. This bonus is designed to provide a head start on growth, enhancing the initial value of your annuity. The bonus is typically offered as an incentive to choose a particular annuity product and can boost the long-term accumulation potential of your annuity.
The Nassau Bonus Annuity Plus FIA offers an impressive 16% initial premium bonus for ages less than 81 and 15% premium bonus for ages more than 81. If you purchase a fixed indexed annuity with a 16% initial bonus and invest $100,000, the insurance company will add an extra $16,000 to your account. As a result, your account value will immediately be $116,000. This bonus will continue to grow along with your account value based on the performance of the chosen crediting strategies (fixed or indexed), potentially enhancing your future income or withdrawal benefits.
The bonus vests over a 10-year period. Each year, you become vested in an additional 10% of the total bonus until you are 100% vested at the beginning of the 11th policy year. The vested amounts of the bonus are the portions you do not forfeit due to an early partial withdrawal or surrender. The bonus is fully vested in the death benefit and the optional guaranteed lifetime withdrawal benefit payment. However, it's important to note that withdrawals may reduce the vested bonus amount.
If you take a partial withdrawal or surrender, you will receive the vested portion of your bonus according to the schedule below. Any partial withdrawals or surrenders exceeding the penalty-free amount during the first ten policy years will result in the forfeiture of some non-vested bonus amounts.
Bonus Vesting Schedule
| Policy Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
Vested & | 0% | 10% | 20% | 30% | 40% | 50% | 60% | 70% | 80% | 90% | 100% |
It’s important to review any conditions or restrictions related to the bonus, as there might be limitations on accessing it early or specific withdrawal provisions that could reduce its impact.
Note that, as with most financial products, there are no free lunches. This bonus is compensated by slightly lower cap and participation rates compared to similar products that don’t offer a premium bonus. The trade-off here is between getting an immediate boost in your account value through the bonus or potentially achieving higher long-term growth with better crediting rates. The decision ultimately depends on your financial goals and whether you prioritize short-term gains or long-term growth potential.
Free Withdrawal and Surrender/Early Withdrawal Charges
Each year, you are allowed a 5% free withdrawal of your contract value, excluding any non-vested premium bonuses, without incurring charges, fees, or penalties.
If you do not take a withdrawal in a given contract year, the unused 5% free withdrawal percentage is carried over to the next year, accumulating up to a maximum of 25% over multiple years. This Free Withdrawal Rollover feature allows for greater liquidity if withdrawals are postponed. However, if any withdrawals are taken during a contract year, including Required Minimum Distributions (RMDs), the free withdrawal percentage resets to 5% for the subsequent contract year. This feature rewards careful planning to maximize withdrawal flexibility over time.
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 Nassau Bonus Annuity Plus Fixed Indexed Annuity.
| Completed Contract Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11+ |
|---|---|---|---|---|---|---|---|---|---|---|---|
10-yr | 9.6% | 8.7% | 7.8% | 6.8% | 5.9% | 4.9% | 3.9% | 3.0% | 2.0% | 1.0% | 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.
The surrender charge of the Nassau Bonus Annuity Plus Fixed Indexed Annuity is in line with all the other annuity issuers.
Contract/Administrative Charge
The Nassau Bonus Annuity Plus Fixed Indexed Annuity levies no annual contract or administrative fees. However, it charges an annual enhanced benefit fee of 0.95% of the contract value during the 10-year surrender charge period for features such as the enhanced premium bonus, liquidity rollover feature, and early return of premium surrender benefit.
We have already discussed the enhanced premium bonus and the liquidity rollover feature of the Nassau Bonus Annuity Plus Fixed Indexed Annuity. The return of premium feature provides two benefits:
- Upon Surrender: After the fifth contract year, if you choose to withdraw the entire contract value, you are guaranteed to receive no less than your initial premium minus any prior gross withdrawals and enhanced benefit fees.
- Upon Death: The contract value may be transferred to your loved ones if you pass away while the contract is still in force. The death benefit will always equal at least your premium, reduced by any prior gross withdrawals and enhanced benefit fees. This ensures your beneficiaries receive these funds promptly, as annuity death benefit proceeds are not subject to probate.
Riders
The Nassau Bonus Annuity Plus does not offer any optional paid riders. In my opinion, this actually appeals to many people who don’t understand or do not want to dive deep into the complex methodologies the riders often come up with. However, as with most annuities, the Nassau Bonus Annuity Plus has free in-built 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 90 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 6 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.
What Makes This Product Stand Out?
The Nassau Bonus Annuity Plus Fixed Indexed Annuity offers a few features that make a favorable case for this annuity. The ones that I like the most are:
- 16% Premium Bonus: The 16% Premium Bonus, paid on premium payments received on the contract issue, provides an excellent opportunity to jumpstart your account value, giving you a fast start toward your financial goals.
- The free withdrawal rollover feature allows unused withdrawal percentages to roll over to the next contract year, up to a maximum total of 25%.
- The plan offers the S&P Index with multiple crediting methodologies.
- Free Confinement and Terminal Illness Waiver Benefit: This no-fee rider is automatically included for owners under age 65 and includes both a Qualified Nursing Care and Terminal Illness Benefit:
- 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
This product is decent for individuals seeking growth and safety; however, there are a few aspects that could add more value for the annuitant. The features I find less appealing include:
- Lower Crediting Rates on Indexing Strategies: While this is partially offset by the premium bonus, higher crediting rates would enhance the product's appeal.
- Free Withdrawal Percentage: The 5% free withdrawal limit is lower compared to the 10% offered by many annuities, although the liquidity rollover feature helps to compensate for this limitation.
- Annual Fee for Enhanced Benefits: These enhanced benefits come with an annual fee, which, in my opinion, should be reduced or removed entirely since the product already compensates for some of these limitations.
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.
Nassau Life and Annuity Company
Nassau Life and Annuity Company is an insurance provider that specializes in offering retirement products, particularly annuities. The company is headquartered in Hartford, Connecticut, and has a long history dating back 170 years. Nassau Financial Group, which includes Nassau Life and Annuity Company, serves 374,000 policyholders and contract holders.
Nassau Life offers a variety of annuity products, including indexed annuities and multi-year guaranteed annuities (MYGAs). Their product lineup is designed to cater to different retirement needs, such as protecting savings, delivering guaranteed income, or covering health care costs. The company is known for providing low minimum premiums, highly customizable contracts, and strong customer service
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | B++ |
KBRA | BBB+ |
Although the rating is not the best, it is not even that bad. It is considered to be strong and stable financially. As of June 2024, some of the financial highlights for Nassau Life and Annuity Company include its:
- $24.3 billion Assets Under Management
- $1.5 billion of total adjusted capital
- 106% solvency ratio
Going by the operating history, financial numbers, and ratings, we can safely gauge that you can trust your savings with Nassau Life and Annuity 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 Nassau Bonus Annuity Plus Fixed Indexed Annuity offers a compelling combination of features designed to balance growth potential, financial security, and liquidity. With benefits such as an enhanced premium bonus, a unique free withdrawal rollover feature, and a return of premium guarantee, the product provides significant value to individuals seeking a reliable retirement solution. While the annual fee for enhanced benefits and lower initial free withdrawal percentages may deter some, these are mitigated by the product's overall design, which aims to maximize flexibility and long-term value.
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.