L Share Annuity Class

What is the L Share Annuity Class?

The L share annuity class is a variable annuity’s version that begins paying earlier than others, but has high administrative costs. This one is specifically curated for investors who wish to start withdrawing funds from an account after a short time period.

Apart from this, there are other share classes that are provided by variable annuities, such as A share, B share, C share, O share and X share.

In general, a variable annuity is a long-term investment that is set up by an insurance firm for an investor who is planning to retire. The investor pays a specific annual premium, which is again invested in any of the assets’ combination, such as Money market funds, Bonds, and stocks.

The accumulated wealth from such investments is usually tax-deferred until the money gets withdrawn, and the variable annuity value is correlated with the Underlying investments’ performance.

Along with the paid premium, the annuitant also has to pay a Mortality Risk and Expense (M&E) fee to recompense the insurance firm for the risk that the annuitant may outlive the life expectancy. Thus, the insurance company offers assured annuitized frequent payments to the annuity investor. These variable annuities get regulated by the state insurance regulators, the Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC).

Benefits and Drawbacks of L Share Annuity Class

Benefits

• There are several share classes that are available in the variable annuities. Out of those, L share class is one. This class is different from the remaining annuity classes as far as M&E fee schedule, expense fees, administrative fees, and surrender charges are concerned.
• The surrender period, here, is the time period during which the annuitant might not withdraw any fund from his account. Or else, a penalty or surrender charge will apply.

Drawbacks

• L share annuity classes provide a higher Mortality Risk and Expense (M&E) charge in comparison to any other variable annuity classes. This M&E charge is a specific percentage of the account value of the annuitant and is a consistent cost that goes on even beyond the surrender period.
• The distributive and administrative fees are such charges that are applied to servicing and the distribution of annuity payments. Some charges are related to the transferring funds’ cost between the accounts and the cost of creating confirmation reports and monthly statements.