Nationwide New Heights Fixed Indexed Annuity

Transcription

1 Nationwide New Heights Fixed Indexed Annuity Fixed Indexed Annuity Hypothetical Illustration Report Prepared for: Prepared on: Valued Client 10/13/2014 Prepared by: Shurwest Financial The purpose of this hypothetical illustration is to demonstrate the effect of hypothetical guaranteed and non-guaranteed performances on your contract s values. The following pages illustrate the potential charges and hypothetical performance of your contract based on the riders and strategy option you select. You should consider the investment objectives, risks, charges and expenses of the fixed indexed annuity product carefully before investing. Please refer to the Disclosure Summary document and Buyer s Guide (included in the sales kit/contract package) for additional information. Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution Not insured by any federal government agency May lose value Page 1 of 11

2 Introduction to Fixed Indexed Annuities What are they? Fixed indexed annuities are contracts you buy from an insurance company to help you build assets for retirement. They are called fixed indexed because their interest earnings will be based on the performance of the underlying indexed strategy option you selected. What are the charges associated with a fixed indexed annuity? Because you can customize your contract by selecting additional riders that meet your unique needs, charges will vary. Specific information about the cost of your annuity can be found on the Summary page (p3). Fixed Indexed Annuities can provide Principal protection Indexed linked interest earnings that may outperform fixed investments Tax-deferred earnings 1 Death benefit protection Access to your money What else should you know? Fixed indexed annuities do have some limitations. Because they re designed for long term savings, you may be charged penalties if you take your money out early (and it can trigger early Contingent Deferred Sales Charges 2 (CDSC) and a market value adjustment (MVA) and/or recoupment of unvested purchase payment bonus, if applicable). If you take withdrawals before age 59½, you may have to pay a 10% early withdrawal federal tax penalty in addition to ordinary income taxes. Also, withdrawals will reduce your death benefit and contract value. All of the guarantees and protections of fixed indexed annuities and riders are subject to the financial strength and claims-paying ability of Nationwide Life and Annuity Insurance Company. Fixed indexed annuities don t guarantee that the Value will grow at a fixed interest rate. Rather, interest earnings are linked to the performance of an index. Optional riders may be elected to help protect you or your beneficiaries by offering guarantees of lifetime income or enhanced death benefits. A fixed indexed annuity is not a registered security, and while the values of the contract may be affected by an index, the contract does not directly participate in any stock or equity investments. Financial terms are presented throughout this report. See detailed explanations on the Definitions page. 1 Tax deferral offers no additional value if an annuity is used to fund a qualified plan, such as a 401(k) or IRA, and may not be available if the annuity is owned by a non-natural person such as certain types of trusts. 2 A charge that may be assessed on withdrawal or full surrender prior to the end of the CDSC schedule. In CA, CDSC is called a surrender charge. Page 2 of 11

3 Summary This illustration has been prepared specifically for Valued Client to assist in understanding how this contract can work. Prepared for Owner Valued Client Joint Owner Annuitant Co-Annuitant - State Prepared on type Non-Qualified funding Purchase payment amount Total contract funding - Valued Client AZ 10/13/2014 Male, Male, Annualized growth rates Hypothetical growth rates Index return New Heights net return 4 Last 10 years Highest 10 years 5 Lowest 10 years 5 Variable Assumed growth rate 6 Crediting index S&P 500 Cap rate 7 No maximum rate Uncapped Strategy term 2 years % % % 2.93 % 8.00 % 3.94 % 9.65 % 5.88 % Balanced Allocation Strategy Option illustrated 3 Strategy A Equity Indexed Declared Rate Declared Strategy Allocation Allocation Rate Spread Withdrawals Free withdrawal schedule Completed contract years Free withdrawal percentage 0% 7% 7% 7% 7% 7% 7% 7% 7% 7% 10% % 35 % 1.00 % 2.25 % CDSC schedule Completed contract years CDSC percentage 10.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% 3 Hypothetical values throughout this illustration assume that the equity indexed allocation, the declared rate allocation, the declared rate and the strategy spread (crediting rates) remain unchanged for the life of the contract. Note: under your contract these crediting rates may change at the end of each strategy term. 4 Based on the surrender value that includes return of purchase payment guarantee amount and minimum guaranteed contract value with the Balanced Allocation Strategy option and any optional rider, if elected. 5 Hypothetical annualized growth rates calculated as follows: assume a new contract issued each business day over the last 30-year period ending 10/13/2014 utilizing the closing price of the S&P 500 Index on those days. The annualized growth rates shown assume that the contract was held for 10 years with no withdrawals. 6 Variable Assumed Growth Rate is a series of 30 years of variable index returns of which the geometric mean is 8.00 %, which results in the 5.88 % hypothetical growth rate for the contract. 7 A cap is a common feature of indexed annuities which places a limit on the maximum interest rate that can be credited to your contract. New Heights does not have a cap rate on the earnings of the strategy options. 8 For purposes of this illustration the strategy term length is 2 years for the life of the contract. For purposes outside of this illustration, once the CDSC period is complete the strategy term length may be reduced to annual. Page 3 of 11

4 Strategy A Basic output Prepared by: Shurwest Financial Prepared for: Valued Client Based on annuitant: Valued Client Rider: None Firm: N/A Prepared on: 10/13/2014 Method Illustrated: Variable Assumed Purchase Payment: State: AZ Hypothetical Illustration Table 9 Variable Assumed Year End Annuitant s Attained Age Index Return Percentage 10 Value Variable Assumed 8.00% Non-Guaranteed Guaranteed Minimums (Assumed 0%) Surrender Value 11 Death Benefit 12 Withdrawals Value Surrender Value 11 Death Benefit 12 Withdrawals At Issue 60 N/A $90,000 $0 $90,000 $ % $95,166 $109,326 $0 $90,700 $ % $108,264 $99,203 $108,264 $0 $91,630 $ % $108,264 $108,248 $124,739 $0 $92,560 $ % $135,059 $126,267 $135,059 $0 $93,490 $ % $135,059 $127,523 $135,059 $0 $94,420 $ % $142,583 $135,953 $142,583 $0 $95,350 $ % $142,583 $148,756 $165,130 $0 $96,280 $ % $154,358 $150,052 $154,358 $0 $97,210 $ % $154,358 $163,682 $177,820 $0 $98,140 $ % $179,919 $179,919 $179,919 $0 $ % $179,919 $182,570 $184,751 $0 $ % $179,919 $179,919 $179,919 $0 $ % $179,919 $199,671 $216,391 $0 $ % $243,350 $243,350 $243,350 $0 $100,579 $100,579 $ % $243,350 $267,440 $287,774 $0 $101,585 $101,585 $ % $336,376 $336,376 $336,376 $0 $102,601 $102,601 $ % $336,376 $356,165 $372,677 $0 $103,627 $103,627 $ % $339,559 $339,559 $339,559 $0 $104,663 $104,663 $ % $339,559 $339,559 $339,559 $0 $105,710 $105,710 $ % $339,559 $339,559 $339,559 $0 $106,767 $106,767 $ % $339,559 $367,692 $391,332 $0 $107,834 $107,834 $ % $408,331 $408,331 $408,331 $0 $108,913 $108,913 $ % $408,331 $408,444 $408,537 $0 $110,002 $110,002 $ % $437,181 $437,181 $437,181 $0 $111,102 $111,102 $ % $437,181 $438,129 $438,905 $0 $112,213 $112,213 $ % $437,181 $437,181 $437,181 $0 $113,335 $113,335 $ % $437,181 $468,927 $495,524 $0 $114,468 $114,468 $ % $529,870 $529,870 $529,870 $0 $115,613 $115,613 $ $529,870 $529,870 $529,870 $0 $116,769 $116,769 $ % $555,084 $555,084 $555,084 $0 $117,937 $117,937 $0 9 These illustrations aren t intended to reflect the performance of any available options or to predict or project future performance results. Your performance could be different than the hypothetical examples shown. 10 Shows the S&P 500 Index annual rate of return for each year. 11 Surrender value includes CDSC charges and assumes no Market Value Adjustment (MVA). An MVA is not applicable in all states. 12 Death Benefit shown is the greater of the Balanced Allocation Value (BAV) or surrender value. Page 4 of 11

5 Strategy A Hypothetical illustrations across different historical periods of the S&P Prepared by: Shurwest Financial Prepared for: Valued Client Based on annuitant: Valued Client Rider: None Firm: N/A Prepared on: 10/13/2014 Method Illustrated: Variable Assumed Purchase Payment: State: AZ year end Geometric average Strategy earnings growth percentage % 6.55 % Lowest 10 Years 14 Last 10 Years 14 Highest 10 Years 14 Mar 09, Mar 08, 2009 Sep 30, Sep 29, 2014 Aug 23, Aug 22, 2000 value Strategy earnings growth percentage 15 Value Strategy earnings growth percentage % % 3.85 % $125, % $125,268 $133, % $122, % $133,477 $122,935 $133, % $147, % New Heights 2.93 % New Heights 3.94 % New Heights Value $118,570 $118,570 $123,133 $123,133 $152,662 $152,662 $207,273 $207,273 $251, % S&P 500 market fluctuations Geometric average Year 0 Year 2 Year 4 Year 6 Year 8 Year 10 Year 0 Year 2 Year 4 Year 6 Year 8 Year 10 S&P 500 index % S&P 500 index 5.87 % Year 0 Year 2 Year 4 Year 6 Year 8 Year 10 S&P 500 index % Growth of Balanced Allocation Value without any withdrawals 14 Highest 10 years Last 10 years Lowest 10 years Year 0 Year 2 Year 4 Year 6 Year 8 Year 10 year $300,000 $200, These illustrations aren t intended to reflect the performance of any available options or to predict or project future performance results. Your performance could be different than the hypothetical examples shown. 14 Each scenario is calculated as follows: assume a new contract issued at the beginning of each 10-year period listed at the current Strategy Option rates and held for 10 years with no withdrawals. 15 Represents the rate of earnings that would have been credited to your contract value at the end of each two-year term. Strategy Earnings growth percentage calculated from issue date through the 10th contract anniversary for the illustrated historical period. Page 5 of 11

6 Strategy A The potential impact of a Market Value Adjustment 16 (MVA) on cash surrender values Prepared by: Shurwest Financial Prepared for: Valued Client Based on annuitant: Valued Client Rider: None Firm: N/A Prepared on: 10/13/2014 Method Illustrated: Variable Assumed Purchase Payment: State: AZ Market Value Adjustment (MVA) Upon issuance of a New Heights contract, Nationwide Life and Annuity Insurance Company faces the risk that contract owners may choose to withdraw money from the contract at times when the market value of investments backing the annuity contract is low. The market value adjustment (MVA) provision allows you to share some of that risk and in return, Nationwide is able to offer you strategy options with more favorable long-term growth potential relative to strategy options offered without an MVA. The MVA is an adjustment (positive or negative) that may be applied to the contract if you make a partial withdrawal or full surrender of your contract value before the end of the Contingent Deferred Sales Charge (CDSC) period. An MVA will not apply to free withdrawals, Required Minimum Distributions, death benefit, annuitization, withdrawals qualifying under the long-term care event or terminal illness or injury 17 provisions, and any withdrawal made from contracts continued under the joint option for death benefit. When an MVA applies, it will be based on the portion of a withdrawal or full surrender that is greater than the remaining free withdrawal amount. Subject to several limits, the calculation for the MVA will depend on the change in the yield of the Barclays U.S. Corporate Index 18 between the date of the withdrawal or full surrender and the date your contract was issued. The MVA may be positive, negative, or zero. If the MVA is negative, it could decrease the amount that you receive when you take a withdrawal or surrender. Conversely if the MVA is positive, it could increase the amount you receive. The following example illustrates the effect of the MVA on the surrender value if the change in the yield on the Barclays U.S. Corporate Index is positive or negative after you purchase your contract. This example assumes a full surrender in the 5th contract year 19 : Surrender Change in MVA index MVA adjustment Surrender value at value before from issue to to surrender value after surrender MVA surrender date value MVA.00 $94, % $ $94, $94, % $0.00 $94, $94, % -$ $94, Not applicable in all states. 17 This may not be available in all states and long-term care may be referred to as confinement. 18 Barclays Capital Inc. and its affiliates ( Barclays ) is not the issuer or producer of Nationwide New Heights Fixed Indexed Annuity ( New Heights ) and Barclays has no responsibilities, obligations or duties to purchasers of New Heights. The Barclays U.S. Corporate Index is a trademark owned by Barclays Bank PLC and licensed for use by Nationwide Life and Annuity Insurance Company ( Nationwide ) as the Issuer of New Heights. Barclays only relationship to Nationwide is the licensing of the Barclays U.S. Corporate Index which is determined, composed and calculated by Barclays without regard to Nationwide or the New Heights. While Nationwide may for itself execute transaction(s) with Barclays in or relating to the Barclays U.S. Corporate Index in connection with New Heights that purchasers acquire from Nationwide, purchasers of New Heights neither acquire any interest in Barclays U.S. Corporate Index nor enter into any relationship of any kind whatsoever with Barclays upon purchasing New Heights. New Heights is not sponsored, endorsed, sold or promoted by Barclays, and Barclays makes no representation or warranty (express or implied) to the owners of New Heights, the Issuer or members of the public regarding the advisability, legality or suitability of New Heights or use of the Barclays U.S. Corporate Index or any data included therein. Barclays shall not be liable in any way to the Issuer, purchasers, or to other third parties in respect of the use or accuracy of the Barclays U.S. Corporate Index or any data included therein or in connection with the administration, marketing, purchasing or performance of New Heights. 19 These illustrations aren t intended to reflect the performance of any available options or to predict or project future performance results. Your performance could be different than the hypothetical examples shown. Page 6 of 11

7 New Heights features Balanced Allocation Strategy New Heights offers you multiple Balanced Allocation Strategy options, known as strategy options, all of which protect your principal and include the potential of strategy earnings. Strategy earnings are credited at the end of each strategy term, on withdrawals, when a full surrender is requested and when death benefits are payable. Strategy options are a blend of an equity indexed component, declared rate component and strategy spread component. Since no limits are placed on your earnings potential, you have the opportunity to receive potentially higher long-term accumulation based on the performance of the underlying index. In general, the strategy option works like this: The equity indexed component is the equity indexed allocation, multiplied by the performance of the underlying indexes 20. The declared rate component reflects interest earned on the declared rate allocation, based on an interest rate (the declared rate) established by Nationwide. These two are combined and the total amount in excess of the strategy spread component is used to determine the strategy earnings, if any, at the end of the strategy term, on free withdrawals and upon death. Partial strategy earnings may be credited on withdrawals in excess of the available free withdrawal amount. If the strategy spread component is greater than the result of the other two components combined, no earnings would be credited. Strategy earnings will never be less than zero. There are multiple strategy options to choose from to help you meet your long-term goals and objectives. Only one strategy option may be selected for each strategy term. The equity indexed allocation, the declared rate allocation, the declared rate, and the strategy spread are set at the start of each strategy term and cannot be changed during a strategy term. Strategy earnings calculation Equity indexed component + Declared rate component Strategy spread component Balanced Allocation Strategy = Strategy earnings 20 Market indexes do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; neither an Index nor any market-indexed annuity is comparable to a direct investment in the financial markets. Clients who purchase indexed annuities are not directly investing in a stock market index. A blend of indexes may not be available at the time of contract issue. Page 7 of 11

8 Definitions Age The owner s age, unless the owner is a trust or corporation, then the annuitant s age is used. Annuitant The person upon whose life any life-contingent annuity payments depend and the person whose death triggers payment of the death benefit. If a coannuitant is named, the annuitant is also the person who will receive the benefit associated with the joint option for death benefit on the death of the co-annuitant. Annuitization The period during which annuity payments are received by the annuitant. Annuity Commencement Date The date on which annuity payments are scheduled to begin if this contract is then in force. Balanced Allocation Strategy The formula used to determine the amount of strategy earnings that will be credited to the contract value. The Balanced Allocation Strategy may offer several strategy options to choose from. Only one strategy option can be elected per strategy term. Balanced Allocation Value (BAV) The BAV is calculated daily and is the greater of (1) the contract value, plus any unrealized strategy earnings (strategy earnings that have not yet been credited to the contract), or (2) the Return of Purchase Payment Guarantee amount. Co-Annuitant The person designated by the contract owner to receive the benefit associated with the joint option for death benefit on the death of the annuitant. The terms, conditions, benefits and rights of the annuity described in this document, as well as any documents describing elected options, endorsements or attached application form. Owner The person possessing all rights under the contract prior to the annuity commencement date, unless there is a joint owner. Value The contract value is your purchase payment, purchase payment bonus amount if applicable, credited strategy earnings minus rider charges and withdrawals. Year The twelve-month period starting on each contract anniversary. Death Benefit The benefit payable on the death of the annuitant and the death of the co-annuitant, if any, provided such death occurs before the annuity commencement date while the contract is in force, and there is no contingent annuitant. Declared Rate The declared rate is the interest rate that will be used to calculate interest applicable to the declared rate allocation. Declared Rate Allocation The declared rate allocation is a percentage that represents the proportion of the strategy option that is tied to the declared rate. Equity Indexed Allocation The equity indexed allocation is a percentage that represents the proportion of the strategy option that is tied to the performance of the index. Free Withdrawal A free withdrawal is the amount that you can withdraw from your contract each contract year without incurring a CDSC. Index The index selected by Nationwide to determine strategy earnings for a particular strategy option. Page 8 of 11

9 Definitions Index Value On a business day, the closing value of the index published for that day. On a day other than a business day, the index value on the previous business day. The initial index value for each strategy option is shown on the contract specifications pages. Joint Owner The person designated as a second person (in addition to the contract owner) to possess an undivided interest in the contract. If there is a joint owner, references to contract owner and joint owner will apply to both of them, or either of them, unless the context requires otherwise. Surrender Value The amount available for full surrender of the contract net any MVA, if applicable, is the greatest of: 1) the Minimum Guaranteed Value; 2) the Modified Value less any applicable CDSC (less any applicable unvested purchase payment bonus if the purchase payment bonus is elected); and 3) the Return of Purchase Payment Guarantee Amount. Market Value Adjustment In select states, an MVA may adjust the withdrawal amount payable, up or down, depending upon the interest rate conditions at the time of distribution as compared to interest conditions at the time your contract was issued. Purchase Payment Money deposited into the contract by the contract owner. Rider An option you can add to your annuity at an additional cost that gives you extra features or guarantees to fit your personal situation. Strategy Spread The strategy spread is an annual percentage rate that is deducted when calculating strategy earnings. Strategy Term The strategy term is a length of time, expressed in years. Surrender Upon a full surrender of the contract, the contract owner will receive the surrender value, less any applicable taxes withheld. Page 9 of 11

10 Disclosure Illustration Only This is an illustration only and designed to help you better understand how the annuity contract you are considering works and might look in the future under various conditions. This illustration is not intended to indicate actual performance nor predict future results. The hypothetical, non-guaranteed values shown are calculated based on the historical performance of the index as indicated. This illustration assumes current strategy option crediting factors and other non-guaranteed rates as of the assumed issue date. These rates are subject to change. It is likely that the index will, in fact, not repeat historical performance and that non-guaranteed elements will change over time. This means that actual non-guaranteed values may be higher or lower than those shown in this illustration. See the Nationwide New Heights Fixed Indexed Annuity Disclosure Summary provided by Nationwide or your insurance or investment professional for details, definitions, limitations and charges. Not a Stock Market Investment Fixed indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. The S&P 500 Index does not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; neither a market index nor any fixed indexed annuity is comparable to a direct investment in the equity markets. Fixed indexed annuities do not directly participate in any stock or equity investments. When you purchase New Heights you are not directly investing in a market index. Not FDIC Insured Subject to the terms, conditions and limitations of New Heights. Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. All guarantees and protections are subject to the claims-paying ability of Nationwide Life and Annuity Insurance Company. General Tax Information Under current tax law, annuities provide the benefit of tax deferred accumulation. This means that as your contract value grows, you do not have to pay ordinary income taxes on the interest credited to the contract until it is withdrawn or paid out as a death benefit. Please note that the effect of ordinary income taxes and any applicable tax penalties, is not reflected in the values shown in this hypothetical illustration. Any applicable taxes or penalties would reduce the net amount that you actually receive. When you surrender your contract or take a withdrawal from your contract you may be subject to federal and state income taxes on the amount you received. Generally, the tax treatment of your annuity contract will depend on a variety of factors, including whether your contract is purchased with non-qualified or qualified funds. A death benefit paid under the contract is generally subject to ordinary income taxes in the same way that a withdrawal or surrender would be subject to income taxes during your life. Please consult your tax advisor regarding the applicability of these rules to your specific situation. The information discussed in this section and the next section is general in nature and should not be construed in any way as tax advice. Neither Nationwide nor its agents or employees are authorized to provide tax advice. Non-Qualified vs. Qualified s Non-Qualified For non-qualified contracts, withdrawals are generally subject to ordinary income tax to the extent of gain in the contract at the time of the withdrawal. This means that to the extent that interest has been credited to your contract, and not previously withdrawn, that portion of any distribution from your contract may be subject to ordinary income tax. In addition, if you have not attained the age of 59½ at the time of the withdrawal, a 10% early withdrawal federal tax penalty is applied to the taxable portion of that withdrawal. However, if you convert your annuity contract to a stream of payments on the annuity commencement date, each payment generally will receive exclusion ratio tax treatment meaning that a portion of each payment will be taxed to the extent it represents gain in your contract, and a portion will be treated as a non-taxable recovery of your cost basis (generally the purchase payment for new contracts, but could vary based on previous contracts that were transferred into this contract) in your contract. Page 10 of 11

11 Disclosure Qualified A qualified contract means that you are purchasing the annuity within a retirement account or plan, such as a traditional IRA or an employer sponsored retirement plan. Generally, the funds in this type of contract have been established with pre-tax dollars (money which has not been subjected to income taxes), although there may be a combination of pre-tax and aftertax dollars in such accounts. For qualified contracts, the entire amount of any withdrawal or death benefit will be subject to income taxes. In addition, if you have not attained the age of 59½ at the time of a withdrawal, a 10% early withdrawal federal tax penalty may be applied to the taxable portion of that withdrawal. Purchasing an annuity within an IRA or other qualified plan provides no additional tax benefit, therefore your purchase should be based on the annuity s features other than tax deferral. S&P 500 Index The S&P 500 is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Nationwide Life and Annuity Insurance Company. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); DJIA, The Dow, Dow Jones and Dow Jones Industrial Average are trademarks of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Nationwide Life and Annuity Insurance Company. Nationwide New Heights Fixed Indexed Annuity is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500. Annuities have limitations. They are long-term vehicles designed for retirement purposes. They are not intended to replace emergency funds, to be used as income for day-to-day expenses or to fund short-term savings goals. Please read the contract for complete details. Nationwide New Heights is underwritten by Nationwide Life and Annuity Insurance Company, Columbus, Ohio 43215, member of Nationwide Financial. Guarantees and protections are subject to the claims-paying ability of Nationwide Life and Annuity Insurance Company. Nationwide New Heights is a single premium fixed indexed deferred annuity issued by Nationwide Life Insurance Company, Columbus, Ohio, a member of Nationwide Financial. Please note, the contract does not directly participate in any stock or equity investments. Nationwide, Nationwide Financial, the Nationwide framemark, Nationwide New Heights, Nationwide High Point 365 and Nationwide High Point are service marks of Nationwide Mutual Insurance Company Nationwide Financial Services, Inc. All rights reserved. (02/14) Page 11 of 11