The RILA history is one that started slow but is really picking up steam over the last couple years, not only in the industry, but at The Leaders Group as well; that is why our representatives should pay attention to this product if they are not aware of it and selling it already. In fact, LIMRA recently published U.S. Annuity Sales Estimates for year-over-year growth 2018 vs 2019 showing that while VA’s were down 8% and traditional index annuities up only 13%, RILA’s made a huge jump and were up 63%. The attraction here is market participation, with downside protection at no cost to the client, and Lincoln has one of the top contracts out there right now. Along with some of the highest – if not the highest – market cap rates in the industry, additional product design options that you do not see on a lot of other “Buffer Annuities” is another reason many financial professionals seem to be flocking to this contract.
The Lincoln Level Advantage contract has 1-year, 6-year annual lock, and 6-year terms to choose from, and you can track an index (four to choose from or combine), select variable subaccounts (14 to choose from), or a combination of both. You can also choose to design these contracts with an account value or return of premium death benefit.
If you choose the 1-year term and track the S&P 500 index, you have 10%, 15%, 20%, or 100% buffer/protection options to choose from. If you were to choose one of the other two available index options (Russell 2000 or MSCI EAFE), you would only currently have the 10% buffer option. At the end of that 1-year term, you have the option to renew the contract at the current cap rates, do an internal exchange to another product, do an external transfer to another product, or liquidate the account.
If you choose the 6-year annual lock contract and track one or a combination of the four offered index options, it operates like the 1-year contract except your cap rate is locked in for six years at issue of the contract, and you only have the 10% buffer/protection option. At the end of that 6-year term, you have the option to renew the contract at the current cap rates, do an internal exchange to another product, do an external transfer to another product, or liquidate the account.
If you choose the 6-year contract you can track any one or a combination of the four offered index options, it is a 6-year point-to-point and your cap rate for that period is locked in at issue of the contract, and you have 10%, 20%, and 30% buffer/protection options to choose from. At the end of that 6-year term, you have the option to renew the contract at the current cap rates, do an internal exchange to another product, do an external transfer to another product, or liquidate the account.
As an example, with the current cap rates this contract has, it is so strong that if you had a client that chose to do the 6-year term contract, S&P Index, account value death benefit, and 10% buffer/protection, they would not even have a cap. The current cap rate listed for this design is “uncapped.” So really, you just have market participation with a 10% buffer/protection and no fees. If your client were to choose the same thing as above, except they wanted 20% protection on the downside, they would have a 100% cap over the 6-year point-to-point term. So, the downside with this option is that if you put in $100,000 and grew it to $250,000 over the next 6 years, you would only be able to keep $200,000 of it.
The last thing that I want to mention is that if you do use any of the 14 different variable subaccount options within any of these contracts, there would be product charges and subaccount charges on the portion of money that is invested in the variable account options only.
If you would like to learn more about the Lincoln Level Advantage contract and the different designs that you can create, please give me a call and/or click on the links to the marketing material and Lincoln Level Advantage website below.