Today’s review is on the Equitable Structured Capital Strategies Plus Variable Annuity. The purpose of this review is to show you the strengths and weaknesses of this Annuity. In order to make an informed decision, it is important to consider all available facts.
- Product type
- Investment options that are available and their realistic long-term investment return expectations
- How it can best help your financial plan
- How it’s most poorly used as part of your financial plan
Equitable Structure Capital Strategies Plus Annuity Quick Facts
|Product Name||Equitable Structured Capital Strategies Plus|
|Type of Product||Fixed Indexed Annuity|
|Standard & Poor’s Rating||“AA-” (Good)|
Before we go into detail, here is an important legal disclosure.
This review of Equitable Structured Capital Strategies Variable Annuity is an independent review at the request of readers. Intended to explain my perspective when breaking down the positives and negatives of this particular model annuity. This is an independent product review, not a recommendation to buy or sell an annuity. Equitable has not endorsed this review in any way, nor do I receive any compensation for this review. Before purchasing any investment product be sure to do your own due diligence and consult a properly licensed professional, should you have specific questions related to your circumstances. This review is not intended to give specific advice and your adviser may know more about your circumstances to make an appropriate recommendation. All names, marks, and materials used for this review are property of their respective owners.
Before we go into the review, some information on Equitable
Equitable Holdings (formerly The Equitable Life Assurance Society of the United States and AXA Equitable Life Insurance Company, and also known as The Equitable) was founded by Henry Baldwin Hyde in 1859. In 1991, Axa, a French insurance company, acquired majority control of The Equitable.
In 2004, it officially changed its name to AXA Equitable Life Insurance Company. By 2018, the company had over 15,800 agents licensed by the State of California. In January 2020 it changed its name back to Equitable following its spinoff from AXA and the related public offerings beginning in May 2018.
There are a few ways that Agents might pitch Equitable Structured Capital Strategy Plus
- Lock in market gains?
- Possibility to Obtain uncapped market growth?
- Principal protection?
Fees for Equitable Structured Capital Strategies Plus:
Total Annual Portfolio Operating Expenses: 1%
How does A Structured Based Variable Annuity Work?
Before getting into the details of this variable annuity it is important that you understand what a structured product based variable annuity is.
This annuity is often described as a “hybrid”, it is basically a variable annuity but has characteristics similarly to a fixed index annuity. A structured product provides an agreed level of income or growth over a specified investment period.
Instead of investing in mutual funds like most of variable annuities, this annuity does not invest directly in anything. The way it works is similar to a fixed indexed annuity by mirroring a specific index like the S&P 500.
Another similarity to a fixed index annuity is that with this product the performances of the indices will be subject to certain limitations of potential caps, spreads, and/or participation rates.
The difference between this variable product and a fixed indexed annuity is that the fixed annuity gives you principal protection and this one does not offer you fully principal protection, so this means that the annuitant is exposed to risk in a down market.
How is my principal partially protected?
This type of structured annuity offers you something called “buffer” which is technically a percentage of loss that will be absorbed under the annuity contract before the investor bears further losses.
For example, if a buyer buys a structured variable annuity with a buffer of 10%, and the market is down 15% then the annuitant will have a loss of 5% only instead of 15%.
There is something worth to mention called “the index performance strategy” which allows you to lock-in the gains of a certain period of time and then start over again the next year. This is very good option have, for example, if the market returns are 40% for one year and the second year it is down 20%, with this option you could locked-in the profits for the first year (40%) and for the next year if you have a good buffer option or principal protection you wouldn’t have lost the previous year return. Unfortunately, with this annuity that option doesn’t look very appealing since the cap rates for this option are very low.
Investment Options for the Equitable Structured Capital Strategies Plus:
What are the Limitations for the Equitable Structured Capital Strategies Plus Variable Annuity?
This annuity offers a buffer of 10%, 20%, or 30%. However, there are somethings that you have to take into account before getting into any conclusions.
As I mentioned before, a structured variable annuity can potentially have caps, spreads, or par rates. Well, this annuity is not the exception.
The performance cap rates and the buffer for this annuity varies among what you choose. These are the current rates for 2020:
It is important for you to know that the Standard Segment rates are applicable for the 6-year period only. This means that Buffer and Caps for the gains or losses of your principal are valid for the whole period. For example, if you choose for the -20% buffer, what it basically means is that after the 6-year period your annuity will protect your principal up to a 20% loss and will cap your gains up to 100%, so if the market over a period of 6 years has a return of 300% you will only get a 100% of the gains for those returns.
Maybe the -20% buffer looks appealing but you have to understand that before making any rash decision. When it comes to the -10% buffer it is the same as it counts for the 6-year-period but with the difference that it is uncapped so you will not have any limit on the gains We feel there are likely better ways to create buffers with a strong asset allocation.
When it comes to the lock-in cap rates is when things get a little bit ugly. If you see the rates when you choose the 1-year lockins, it limits you to 12% of the returns and a minimum of 2% per year. The cap rates for this strategy are very low and we think this strategy is very good to have in an annuity because it allows you to lock in profits for a period of time, but with these low cap rates, it does not give you any value at all.
Where does it work best:
- The opportunity for more index-linked growth
- More flexibility than a Fixed Indexed Annuity
- As a high-quality bond replacement as part of an asset allocation strategy
Where does it least work:
- The principal is not entirely guaranteed so Conservative investors will be disappointed
- For those who want access to their money before 6 years
- Low-Cap 1-year lock-ins
- Those who are concerned about a decline over next few years as the principal buffer only helps for total losses after 6 years.
Annuity Edu’s Summary on the Equitable Structured Capital Strategies Plus Variable Annuity Review
In conclusion, as we saw above this product serves as an alternative option to a Fixed Index Annuity but without the full protection that a fixed product provides you. Some agents may pitch you this annuity and tell you that -10% or -20% are very good because the options are uncapped or have very high caps which may result in more returns. I’ts important to understand valuations and the correlation to market returns. But what you have to really pay attention is that those returns are accountable for the 6-year period and if you really want to take advantage of the 1-year-lock-ins, which seems to be the most valuable characteristic of this annuity, you will be giving up a lot of returns since the current cap is to low and the minimum is just 2%.
Nevertheless, this product does not look as bad as other Variable Annuities in the marketplace. But it is always important that you test it against other similar products so you can see which one, the numbers are in favor of. In case you are planning to buy this annuity or a similar one make sure that an expert runs the numbers for you before you make any rash decision that might possibly cost you a lot of money.
Have Questions on the Equitable Structured Capital Strategies Plus Annuity? Have any comments?
Finally, if you need clarity about the Equitable variable annuity or you have any questions and you can’t seem to find the answer here on our website [You can send us your questions here via our Free Annuity Help contact form.] You can also reach out to us by email or by phone.
We hope you our Equitable Structured Capital Strategies Plus Variable Annuity Review was helpful as you’re conducting your own research on this Variable Annuity. We wish you all the best in your retirement journey!