There was an old thread on a product by AVIVA called BPA12. This product no longer exists, but it was claimed it had an 8% guarantee, which everyone said was too good to be true. I did not see anyone, though, argue that the 8% was not really 8% on the income side. (Of course it's not 8% on the accumulation side. Fees, fees, fees.)
From my understanding of the product, the income side received a guaranteed 8% and whatever was not taken from this account as income (once income was turned on) would be passed on to beneficiaries. In this scenario only (income play and death benefit), what part of the 8% guarantee would not be received by annuitant and/or beneficiaries?
FINANCE DAVE said:I'm sorry but I can't be convinced. Calling it an 8% return is misleading IMO, if the returns are deferred. If we're allowed to do that, then give me $1M, and 50 years from now I'll give you 10% guaranteed return...how's that?
If I had 2 hours extra time I'd run a complete NPV analysis on this with DCF model, and show that return to be substantially less than the 8% mentioned.
From my understanding of the product, the income side received a guaranteed 8% and whatever was not taken from this account as income (once income was turned on) would be passed on to beneficiaries. In this scenario only (income play and death benefit), what part of the 8% guarantee would not be received by annuitant and/or beneficiaries?