Principal® launches new variable annuity buffer funds to help safeguard investors from market volatility
Principal Financial Group® today announced the launch of new buffer fund investment options within its variable annuity business aimed at helping customers balance the need to build and protect savings in retirement with managing risk. The new investment options provide both market growth and limited downside protection—two key factors shifting variable annuities in light of rising inflation and market volatility.
On July 1, Principal® introduced the first of four, one-year, defined outcome investment accounts—the Principal Variable Contracts (PVC) U.S. LargeCap Buffer Series. Available exclusively through Principal variable annuities, these accounts help protect individuals from some market loss (up to the first 10% of index losses per defined outcome period) and help them plan for a more consistent and stable investment experience.
“We’ve seen continued demand from individuals nearing retirement and current retirees who are looking for investment options that offer growth potential while reducing risk. And our research shows 66% of investors place equal value on protecting savings and maximizing gains1,” said Sri Reddy, senior vice president, Retirement & Income Solutions at Principal. “Our new buffer accounts are a solution that provide savers the ability to accumulate on the upside while buffering against market downturns at a competitive cost. They were designed for moments like now when inflationary pressures, rising interest rates, and fears of a recession are causing market uncertainty.”
The new buffer series from Principal, which will track the S&P 500 Price Return Index, is designed to provide 10% downside protection and full participation in the first 10% of market gains. Gains above 10% will be determined by the participation rate set at the beginning of the outcome period. If markets perform strongly, investors can continue to experience upside growth with no hard cap on their earnings. And the underlying fund’s physical stock ownership provides dividends, which could improve the overall strength of the account.
The buffer accounts also offer investment flexibility, providing clients with the ability to move money in and out of their accounts at any time.2
“We don’t know how long this market cycle is going to last, so we’re striving to enable better outcomes for investors in a time of uncertainty,” Reddy said. “Our buffer accounts have a shorter, one-year defined outcome period and will reset annually to adjust to future market conditions to help safeguard investments while still enabling growth accumulation.”
Developed and managed by the firm’s global equities investment team, the buffer series can work in combination with both equity and fixed income holdings to reinforce investment goals and tolerance for risk. They are available with Principal® Pivot Series and Principal® Lifetime Income Solutions II variable annuities, as well as most previously issued Principal variable annuities.
Principal has plans to launch three additional accounts in October 2022, January 2023, and April 2023. All four accounts will have a one-year defined outcome period and the participation rates will be set based on market conditions at the beginning of the quarter.
1 Principal Retirement Security Survey – Investments, July 2022
2 Investing after the start date or moving money out before the end date will affect the expected outcome
S&P 500 is a trademark of S&P Global and is used under license. The Principal Variable Contracts (PVC) U.S. LargeCap Buffer Series is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the product.
Before investing, carefully consider the investment option objectives, risks, charges and expenses. Contact a financial professional or visit principal.com for a prospectus or, if available, a summary prospectus containing this and other information. Please read carefully before investing.
The buffer funds have characteristics unlike many other traditional investment products and may not be suitable for all investors.
These strategies could limit the upside participation of the buffer fund in rising equity markets relative to other funds.
The buffer provides limited protection in the event of a market downturn; the buffer fund does not provide principal protection, and an investment may experience significant losses on its investment, including the loss of its entire investment.
The buffer Fund may invest in FLEX Options, which are associated with additional risks.
Due to the cost of the options used by the Fund, the correlation of the Fund’s performance to that of the Index is expected to be less than if the Fund invested directly in the Index without using options, and could be substantially less.
The potential return an investor can receive is subject to the upside cap and the partial participation beyond the cap. If the index grows beyond the cap, the investor will not experience the full gains. The investor will receive a percentage of any gains beyond the cap. This amount, net of fees and expenses, is the maximum return an investor can achieve over its outcome period.
Tax-qualified retirement arrangements, such as IRAs, SEPs, and SIMPLE-IRAs are tax-deferred. You derive no additional benefit form the tax deferral feature of the annuity. Consequently, an annuity should be used to fund an IRA, or other tax qualified retirement arrangement, to benefit from the annuity’s features other than tax deferral. These features may include guaranteed lifetime income, guaranteed minimum interest rates, and death benefits without surrender charges. Guarantees are based on the claims paying ability of Principal Life Insurance Company®.
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About Principal Financial Group®
Principal Financial Group® (Nasdaq: PFG) is a global financial company with 18,500 employees3 passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping more than 54 million customers4 plan, protect, invest, and retire, while working to support the communities where we do business, and build a diverse, inclusive workforce. Principal® is proud to be recognized as one of America’s 100 Most Sustainable Companies5, a member of the Bloomberg Gender Equality Index, and a Top 10 “Best Places to Work in Money Management6.” Learn more about Principal and our commitment to building a better future at principal.com.
3 As of April 30, 2022
4 As of April 30, 2022
5 Barron’s, 2022
6 Pensions & Investments, 2021
© 2022 Principal Financial Services, Inc. Principal®, Principal Financial Group®, and Principal and the logomark design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in the United States and are trademarks and services marks of Principal Financial Services, Inc., in various countries around the world.
Annuities are issued by Principal Life Insurance Company®. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.