Kingston, Ont.-based Empire Life Insurance Co. has launched a new version of its guaranteed minimum withdrawal benefit (GMWB) product, which has lower fees, a reduced bonus and a more graduated payout schedule compared to the previous version of the product, the company announced on Monday.
The new product, called Class Plus 3.0, is an investment vehicle that transforms into a retirement income product, with guaranteed retirement income for life. It also provides downside protection, and 75% death benefit and maturity benefit guarantees.
GMWBs have declined in popularity in recent years, as many insurers have dialed back the benefits and guarantees associated with the products. However, the products can hold appeal for clients who are concerned about running out of money in retirement.
Class Plus 3.0 provides clients with 14 investment funds to choose from, with the option of having as much as 80% of their portfolio allocated to equities.
Clients can choose to begin receiving income as early as age 55, with a payout schedule that increases each year as the client gets older. At age 55, clients would receive 2.85% of the income base they have accumulated. By age 65, they would receive 4% of the income base, and once clients reach age 80 and beyond, their annual payout would grow to 5.25%.
Under the previous version of the product, called Class Plus 2.1, the withdrawal amount began at 3% of the income base at age 55, and increased every five years, eventually reaching 5% once clients reached age 75 and beyond.
The new product features an annual “Income Base Bonus” of 4%, which is applied in each year that the client does not make a withdrawal from the product. That is down from the 5% bonus available on Class Plus 2.1.
The fees associated with Class Plus 3.0 have decreased by between 15 and 25 basis points compared with the previous version of the product, according to an Empire Life spokesperson.
“We’re very pleased to offer Class Plus 3.0 as a way to bring Canadians one step closer to a worry-free retirement,” says Mike Stocks, vice president and chief marketing officer, retail at Empire Life, in a statement. “Whenever you can lower fees, it’s a good news story for consumers as this helps increase their income and build their nest egg faster.”
Photo copyright: stockbroker/123RF