MetLife Inc. and Fidelity Investments have teamed up to produce a new deferred variable annuity that provides a principal protection guarantee.

The new VA, the MetLife Accumulation Annuity, provides investors both growth potential and protection against loss if held for a minimum of 10 years, according to the companies. The principal protection guarantee is backed by MetLife and, of course, carries with it specific terms, exclusions and limitations.

The guarantee is aimed at getting annuity owners to find and then stick to the appropriate asset allocation without worrying that they will lose their principal — something that's all too easily done, particularly in a volatile market, when investors are either afraid to stick with their choices or try to time the market, doing neither very successfully.

In fact, Dalbar's 20th Annual Quantitative Analysis of Investor Behavior Study indicates that the average investor underperforms the market. In addition, fear of losing principal can make investors look for “safe” conservative holdings. Unfortunately, that means that they will likely fail to accumulate enough money even to keep up with inflation.

And that's where the guarantee kicks in, through the preservation and growth rider — which is available at an extra charge. It allows investors to seek growth without losing their basic investment.

According to the company, “The product invests in a diversified portfolio, offering investors the potential to benefit from market growth, while at the same time providing protection for investors against down market cycles.”

The PGR guarantees the investor the return of his initial investment, adjusted proportionally for any withdrawals, at the end of a 10-year period. Withdrawals before the end of the 10 years may carry a 2 percent withdrawal charge.

Also, on every contract anniversary, investors have the opportunity to reset the guaranteed amount to a new, higher amount if the account value has increased. That extends the 10-year period from that date. It may also increase the cost of the PGR.

Instant Insights /

New annuity product protects principal

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