Ohio National Financial Services, part of Ohio National Life Insurance Company, is targeting retail individuals who are currently at or nearing retirement age and looking for a way to increase their retirement income with a new ONdex fixed indexed annuity (FIA) rider.

The new product allows clients to choose from a ‘select group of crediting strategies, or methods of determining what amount of any growth in an index’ but because returns can never fall below the annuity’s guaranteed ‘floor’, investors will never be exposed to any index losses.

‘The optional Income Accelerator rider may provide more certainty for individuals concerned about their retirement assets generating enough income to meet their needs,’ said Michael J. DeWeirdt (pictured), Ohio National’s senior vice president, annuities strategic business. ‘Because it guarantees income for life that will rise for the duration of the contract, it’s capable of helping to address longevity and inflation risks, two challenges that all retirees face.’

According to DeWeirdt, the new product represents Ohio National’s next step into the rapidly expanding fixed indexed annuity market, and it is ‘a strong addition’ to the firm’s annuity business line, as ‘it can offer protection in different market environments’.

An annual point-to-point crediting strategy compares the S&P 500 index’s value at the beginning of the investment year to its value at the end of the investment year to determine an annual growth rate. The annual growth rate is subject to a return cap, or maximum crediting rate for the investment year; and a monthly average crediting strategy looks at the Russell 2000’s value at the start of the investment year, and again at the end of each investment month. The monthly values are used to determine the average monthly index value, which is then used to calculate the index’s growth rate for the year. Interest is credited to the annuity annually. In addition, a three-year point-to-point crediting strategy compares the Barclays Global Trailblazer Index’s value at the beginning of the first investment year to its value at the end of the third investment year to determine the index’s growth rate.

The Barclays Trailblazer family of indices are based on the principles of Modern Portfolio Theory (MPT) developed by American economist Harry Markowitz, and includes the Barclays Global Trailblazer Index, Barclays All Caps Trailblazer 5 Index, and the Barclays Trailblazer Sectors 5 Index which has featured on 49 structured notes marketed by Barclays in the US market. SRP data also shows that there are 11 fixed index annuities linked to the Barclays Aggregate Bond Index.

The Barclays Global Trailblazer Index tracks a dynamic notional portfolio selected from a universe of six indices (Barclays US Tracker ER Index, Barclays Europe Tracker ER Index, the Barclays Japan Tracker ER Index, Barclays US 10 year Note Futures Index, Barclays Euro-Bund Alt Roll Futures Index, and Barclays JGB Alt Roll 10 year Futures ER Index) and one exchange-traded fund (iShares US Real Estate ETF) that provides exposure to the real estate industry sector of the US equity market. Among the six underlying indices, three indices track the performance of rolling futures contracts related to US, European and Japanese benchmark stock indices, and the other three indices track the performance of rolling futures contracts related to US, European and Japanese government bonds. The index also has a portfolio volatility target of 5%.

The optional Income Accelerator Guaranteed Lifetime Withdrawal Benefit (GLWB) rider guarantees that as long as withdrawals never exceed the allowed amount, the income it provides will increase each year. The optional Income Accelerator annuity also features a ‘Power of 3 Guarantee’ that offers three possible ways for income to grow.

The product guarantees at least a 3% increase in value every year as long as the contract is active no matter what the markets are doing, and even if income withdrawals are taken; the value of the annuity will also grow by the greater of the interest credited to the contract’s value plus 3% or the interest credited to the contract value multiplied by three, up to a maximum of 10% in any of the first 20 index years, where no withdrawals are taken; while, at the end of each index year, the product’s value and the contract’s value will be compared with the product’s value to be step-up to the contract's value if it's higher d therefore increasing income.

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