New group fixed indexed in-plan annuity solution will provide participants with upside potential while protecting principal
COLUMBUS, Ohio – Earlier this year, millions of Americans watched as the COVID pandemic impacted the market and the savings in their defined contribution retirement plans, causing them to expect more volatility in the equity markets. This, combined with historically low interest rates, has created an extremely challenging environment for retirement plan participants when making investment decisions.
A recent Nationwide Advisor Authority study found that the number-one financial concern of investors was losses in their portfolio related to COVID-19. As a result of this year’s market turbulence, many Americans have developed newfound interest in protection solutions in hopes of better positioning themselves for the next market downturn.
To address this urgent need, today Nationwide introduced Nationwide Indexed Principal Protection, an in-plan group fixed indexed annuity, the first of a planned suite of in-plan annuities that will be launched over the course of 2021. This new investment option can provide the potential for growth based on the return of a market index while also providing principal protection. Additionally, there are no investment minimums for participants wanting to allocate to this new option.
“Participants, especially those nearing retirement, are looking for ways to protect their investments given recent market volatility. At the same time, they realize they still need growth in order to outpace inflation,” said Eric Stevenson, President of Nationwide Retirement Plans. “Nationwide Indexed Principal Protection is one of the first fixed indexed annuities to be offered as an in-plan annuity that can help participants address both of these needs.”
Nationwide Indexed Principal Protection will provide retirement plan participants with:
- Upside Potential – Participants will have upside potential, up to a cap, based on the performance of the S&P 500 Daily Risk Control 5% USD Excess Return Index. Nationwide Indexed Principal Protection sets an annual cap rate for each index account every calendar quarter. Offering a new index account with a one-year term four times a year allows retirement plan participants to diversify market entry timing.
- Principal Protection – Participants will not lose their principal even if the market index goes down, due to the floor of 0%. When the corresponding market index return is negative over the one-year term, the account loses nothing since the principal is protected.
- Liquidity – Participants can exchange out of the Nationwide Indexed Principal Protection investment option at any time without incurring a contingent deferred sales charge (CDSC). In order to receive interest earnings from an index account, participants must not exchange out before the term ends.
In addition to Nationwide Indexed Principal Protection, in 2021 Nationwide will introduce several in-plan lifetime income options that pair income guarantees with Target Date Funds, all designed to be QDIA (qualified default investment alternative) compliant.
“While the SECURE Act removed many barriers around in-plan annuities by making them more accessible and portable than before, we know it’s not a one-size-fits all situation,” said Eric Henderson, President of Nationwide Annuity. “By leveraging our expertise as a leading provider of annuities, our new suite will offer a broad range of in-plan annuities to meet the needs of plan sponsors and their participants, whether they’re looking to guarantee income or to protect principal, or both.”
Based on Nationwide’s research, plan sponsors, participants, consultants, advisors and financial professionals are becoming more receptive to incorporating in-plan annuities within defined contribution plans.
Nationwide’s Advisor Authority study found that two-thirds of both Millennial investors (65%) and Gen X investors (66%) indicate they are likely to incorporate in-plan guarantees within their defined contribution plans. The study also showed that nearly two-thirds of advisors and financial professionals (64%) say they are likely to adopt in-plan guarantees to provide guaranteed income within clients’ defined contribution plans. Six in ten (60%) employers also say they would consider offering employees lifetime income solutions according to a 2019 survey by Willis Tower Watson.
 The sixth annual Advisory Authority Survey was conducted online within the United States by The Harris Poll on behalf of Nationwide from May 27 – June 25, 2020 among 1,768 financial advisors and 817 investors, ages 18+.
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.
Nationwide Indexed Principal Protection is a group fixed indexed annuity issued by Nationwide Life Insurance Company and held in the general account. Group fixed indexed annuities are not stock market investments and participants are not directly investing in a market index. Guarantees are backed by the claims-paying ability of the issuing insurance company. Transfers out of this contract to other funding providers are subject to certain restrictions.