Deferred Annuity Collar Levels for Risk-Return Balance
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Solution Overview
Problem
Current financial instruments, such as Equity Indexed Annuities and Variable Annuities, provide limited upside potential while protecting against market losses, and there is a need for a product that offers customizable protection and growth options for users, particularly in retirement planning.
Innovation Solution
A single-premium deferred annuity system that includes an accumulation phase with investment options tied to specific indices, allowing users to choose their level of protection and growth potential, with phases such as an Investment Option Period and an optional Access Account Period, and a payout phase based on calculated values.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If Equity Indexed Annuity provides protection against market losses, then risk protection is improved, but upside potential is limited
Solution Approach 1:
The patent applies parameter changes by offering multiple collar levels (50%, 75%, 100% protection) that allow users to adjust the balance between risk protection and upside potential. Each collar level represents a different parameter setting that changes the degree of market loss protection while correspondingly adjusting the maximum gain potential, thus resolving the contradiction between reliability and productivity.
Solution Approach 2:
The invention introduces dynamics through adjustable and customizable collar levels that can be selected based on user risk tolerance. The system transitions from a static fixed-protection model to a dynamic multi-level protection model where users can choose their desired balance between safety and growth potential, effectively addressing the trade-off between risk protection and upside potential.
2Reliability
If Variable Annuity provides performance guarantees, then reliability is improved, but flexibility in investment options is reduced
Solution Approach 1:
The patent segments the investment structure into multiple distinct collar levels (50%, 75%, 100% protection options) and different index choices (S&P 500, Dow Jones, NASDAQ). This segmentation allows users to select specific combinations of protection level and index, providing both performance guarantees at chosen levels and flexibility in customization, thus resolving the contradiction between reliability and adaptability.
Solution Approach 2:
The invention achieves universality by creating a multi-functional annuity product that can serve multiple investment strategies within a single contract. Users can select from various collar levels and index options, making the product universally applicable to different risk tolerances and market views while maintaining performance guarantees, thereby resolving the limitation on investment option flexibility.
3Reliability
If Bank Equity CD limits holder's risk, then risk protection is improved, but upside gains are limited
Solution Approach 1:
The patent resolves this contradiction by introducing variable collar parameters that allow users to select from 50%, 75%, or 100% protection levels. Each parameter setting changes the risk protection level while proportionally adjusting the upside gain potential, enabling users to optimize between reliability and productivity based on their specific needs rather than accepting fixed limitations.
Solution Approach 2:
The invention introduces dynamics by transforming the static risk-return profile of traditional CDs into a dynamic system with multiple selectable collar levels. Users can adjust their position along the risk-return spectrum by choosing different collar percentages, allowing the product to adapt to changing market conditions and user preferences while maintaining both risk protection and upside potential.
Data Source
AI summary
Systems and methods relating to a single premium deferred annuity are provided. In one embodiment, the annuity may be used for retirement planning. Aspects disclosed herein relate to an annuity that provides protection against market losses and allows the purchaser/owner to choose the level of protection.