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Huang and Kwok (2014) study the impact on GLWB value of different policyholders behaviors through stochastic control models, and the authors offer an empirical investigation of the effects of the surrender on the value of the GLWB established in the VA market.
When a GLWB is combined with an indexed annuity product, the client may be able to maximize the level of income he or she can draw from the product package--with a lower premium payment rate than what might be required when a GLWB is paired with a different type of annuity.
The guaranteed lifetime withdrawal benefit (GLWB) guarantees that a certain percentage (typically 3 percent to 5 percent, often based on age) of the amount invested can be withdrawn each year for as long as the contract holder lives.
* With a GLWB, the participant is guaranteed to receive a specified lifetime stream of income, regardless of the investment performance of the account, while still retaining access to the funds in the account.
But whether clients opt for Security Benefit's solution or one from a different provider, there is growing body of evidence to suggest that making a fixed indexed annuity offering a GLWB part of an asset allocation strategy will yield greater retirement income than without the rider.
A retail version of the GLWB might include minimum annual increases and index credits, while the institutional version has only an annual step-up feature, allowing the participant to see an increase in his guaranteed withdrawal amount if his account value increases above his benefit base.
In this case, the company issuing the annuity wanted to make annuity products with GLWB riders more attractive by allowing the non-spouse beneficiary to continue the contract without worrying about making excess withdrawals that could reduce the guaranteed amount that would otherwise be payable over his or her lifetime.
Typically, a candidate for an annuity with a GLWB rider would be between 65 and 72, with enough income from other sources to cover most of their expected needs over the next 10 years, Lofton says.
The GLWB rider is automatically added to the product at no additional charge.
In the light of the growing importance of this market, in this paper we present a pricing model and define a fair price for a GLWB in a market consistent manner.
Although the GLWB guarantees an income stream that may appear similar to annuitization, there are substantial differences between withdrawals and annuitization.
Prudential Annuities, Prudential Financial's domestic annuity business, in January increased its Highest Daily Lifetime Five GLWB to Seven.
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