Today’s review is on the Sun Life Masters Extra II Variable Annuity. This another variable annuity from Sun Life Financial, previous to this article, we reviewed the Masters Prime II. As the purpose of this review is to show you this annuity strengths and weaknesses because before making any financial decision it is important to consider all available facts such as the following:
- 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
Sun Life Masters Extra II Variable Annuity Quick Facts
|Product Name||Masters Extra II|
|Issuer||Sun Life Financial|
|Type of Product||Variable Annuity|
|Standard & Poor’s Rating||“AA” (Very Strong)|
+1 (800) 786-5433
Before we go into detail, here is an important legal disclosure.
This review of Sun Life Masters Extra II 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, and not a recommendation to buy or sell an annuity. As Equitable has not endorsed this review in any way and I dont receive any compensation for this review. So before purchasing any investment product be sure to do your own due diligence. And consult a properly licensed professional. You should 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 Sun Life Financial
Sun Life Financial, Inc. is a Canadian financial services company; it is primarily known as a life insurance company. Being one of the largest in the world; it is also one of the oldest, with a history spanning back to 1865.
Sun Life Financial has a presence in investment management with over CAD$1 trillion in assets under management operating in a number of countries. Sun Life ranks number 273 on the Forbes Global 2000 list for 2019.
There are a few ways that Agents might pitch Sun Life Masters Extra II Variable Annuity
- Access to your money at any time
- Lifetime withdrawals
- Tax- deferred growth
- 2%-5% interest option on purchase
How This Annuity Really Work?
Firs of all, let’s address what the Brochure Guide promise with Annuity. They offer you to options, Option the 2% Five-Year Anniversary Interest Option, under this option the insurance company will credit you 2% of each Purchase payment received prior to the first Account Anniversary and also it will give you a 2% credit of your account value every Fifth-Year anniversary; Option B, the 5% Interest Option, will add a 5% credit to your account of each purchase payment.
Option A, will fit better for people that want to keep this annuity for longer time (10 years), since it will give you a 2% interest on your account value every five years.
And Option B, gives you the 5% but only on the purchase payments made on the first year of the contract, so if you plan to hold this annuity for a shorter premium of time and consistently make payment purchases, this will be your best option.
the fact that this variable annuity gives you two options it does not mean that it a good annuity, the most important thing is to know how much your net returns are, because sometimes they guarantee you 5-7%, but that is before fees, therefore if your fees are above 4% then you will be making almost nothing in comparison to an index fund or other type of investment.
They say that you have access to all your money, which might seem as you have access to your all money at any time. Well, this is a little misleading since you only can withdraw 10% annually and any excess will be penalized with a withdrawal charge. They do offer you the option to access to your limit withdrawal at any time with no effect on your 200% benefit enhancement which you get with the SIM and SIM Plus rider. So, this is really important for you to understand because you won’t be able to withdraw all your funds in case you need them without paying the high surrender fees plus the tax charges that can go around 2-3.5%.
In the next part of this review, we are going to see the fees for this annuity and how it might affect your returns. If you are looking for a customized analysis on your annuity or investment portfolio, we encourage you to contact a Certified Financial Planner that can run the numbers for you and give you a detailed analysis of your financial situation and create a comprehensive retirement income analysis.
Sun Life Masters Extra II Fee Breakdown:
Surrender Charge Fees: 4- year schedule
|Surender Charge %||8%||8%||7%||6%||5%||4%||3%||0%|
|Type||Masters Extra II|
|Mortality & Expense Charge||1.40%|
|Admin Fee (waived over 100k)||0.15% – 50$|
|Death Benefit (optional)||0.40%|
|Sun Income Riser III Living Benefit (optional)||1.10% – 1.95%|
|Sun Income Maximizer Living Benefit (optional)||1.10% – 1.95%|
|Sun Income Maximizer Plus Living Benefit (optional)||1.25% – 1.95%|
|Fund Operating Expenses||0.72% – 1.88%|
|Approx. Total Fees Without Riders (including approx. fund fee)||3.00%|
|Approx. Total Fees with Max Riders (including approx. fund fee)||7.00%+|
As the other review we did on a similar product from Sun Life Financial, this annuity also have a max of 4% when combining all the allowed riders, however, as you can see above it is still super high, and it may be really difficult for you to perform better than those fees every single year.
Later in this review, we are going to see what each rider gives you in terms of benefits, however, as appealing as the rider looks, it is never worth it to pay fees as high as in this annuity. Remember that the only benefit that gives you most income riders is lifetime withdrawal/income, but with the repercussion of giving up all your money so then, they can pay you a fixed income with no protection against inflation. Nowadays there is no necessity for an income rider, the most qualified advisors can help you preserve your money and at the same time withdrawing it every year so you can have a peaceful retirement and leave a legacy to your loved ones.
Investments for Sun Life Masters Extra II Variable Annuity
The Sun Life Masters Extra II can offer you a very wide variety of investments, but always have in mind that if you decide to purchase a rider, then your investment options may be reduce.
Also we’ve found is that many of the funds that variable annuities have available are always higher fee in the annuity itself than if you buy them on your own. So if you want to know how much extra your paying in fees for your funds feel free to contact us and let us run an analysis for you to see how your portfolio can improve.
The amount that you can invest in each fund is assigned to each asset class and you can see it below.
|Living Benefit||SIR III||SIM||SIM Plus|
|Designated Funds||100% must be allocated among specified Funds; or 100% to asset allocation models||100% must be allocated among specified Funds||Same as SIM|
|Portfolio Model (Build Your Own Portfolio)||Allocation Ranges: • 30%-50% Fixed Income Funds • 40%-60% Core Retirement Strategies Funds • 10%-30% Asset Allocation Funds • 0%-20% Core Equity Funds • 0%-20% Growth Equity Funds • 0%-10% Specialty Funds||Allocation Ranges: • 0%-60% Balanced Funds • 40%-100% Fixed Income Funds||Same as SIM|
For more information on the funds for this annuity check this link.
Sun Life Masters Extra II Variable Annuity Riders
Sun Income Riser III Rider (SIR III)
This is a Guaranteed Withdrawal benefit rider and basically what it does is, it offers you lifetime withdrawals with an opportunity to for a bonus, which is 7%, to be added to your benefit base if you defer taking withdrawals during a specified time period under your contract. Remember that this rider is only worth it if you plan to use it for the rest of your life, but its only purpose is to deplete your benefit base with withdrawals and high fees and then offering you a fixed withdrawal rate forever.
Sun Income Maximizer (SIM)
This rider offers you a similar benefit as the SIR III, with the only difference that it includes a higher bonus than the SIR III, and offers a benefit base enhancement equal to 200% of your first-year Purchase Payments. The bonus for this option is 8%.
Sun Income Maximizer Plus (SIM Plus)
The SIM Plus Rider offers the bonus of 8% and the benefit-based enhancement plus the opportunity to increase the amount of your annual withdrawal over time regardless of the market performance.
This Annuity works Best:
- High fees if you choose lifetime benefits
- Death Benefit Enhancers.
- Tax-deferred growth.
- Withdrawal Credit bonus
- Misleading Brochure Guide (No access to all your money)
This Annuity Works Worst:
- Lifetime Benefits
- Those who need liquidity.
- Principal Protection
After reviewing the Sun Life Masters Extra II Variable Annuity, we can say that this annuity is pretty similar to the one we did before (here), however, this one has a longer surrender schedule plus some credit benefits that come along with the riders. Some of these benefits are created to offset the high fees in these types of variable annuities, but despite that when you get all the numbers you the insurance company is the one benefiting the most if you buy a variable annuity. We’re not against fees, but fees have to come together with the value provided, and these fees are not only high but also, they don’t give you enough value to cover those expenses, they just give you the illusion of having a lifetime income for the price of depleting all your money.
Always take your time when it comes to a financial decision that most likely will impact your retirement. It is important to get all your numbers right and create a retirement income analysis. Remember that most of the times you do not need to give up all your money to create lifetime income, you can preserve it and at the same time take withdrawals without losing your principal overtime.