Variable annuities

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Related to Variable annuities: Fixed annuities

Variable annuities

Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio.

Variable Annuity

An annuity that provides the annuitant a small guaranteed return for the life of the annuity along with another return that depends on the performance of a portfolio. Like any annuity, the annuitant buys into a policy, either with a lump sum or premiums over a period of time. When the annuitant reaches a certain age or retirement (whichever is greater), he/she begins to receive payments. Generally speaking, the insurance company issuing a variable annuity invests the premiums in investment vehicles such as stocks or mutual funds. This exposes the annuitant to the risk that he/she will be stuck with a smaller return, but it also carries the possibility of a much larger return. See also: Fixed annuity.
References in periodicals archive ?
The effects of recent tax-law changes, which would expire if Congress does not renew them, may cause people to be less keen about variable annuities, but those nearing retirement may find great value in the new risk-management tools.
Variable annuities require a careful analysis of fees versus the potential benefits.
27% in insurance and money management fees on variable annuities, while the average mutual fund charges only 1.
Variable annuities and mutual funds often compete for the same investment dollars because, like a "family" of mutual funds, a variable annuity allows the holder to invest in a similar range of professionally managed securities portfolios.
TIAA-CREF also had the assurances of college and university leaders that they would accept use of stocks in pension plans and would amend those plans so participants could invest in variable annuities.
Also, there is a large body of literature supporting the use of variable annuities as the investment vehicle of choice in net income make-up charitable remainder trusts, to ensure that there is no accidental income.
Glenn Daily, a fee-only insurance consultant in New York, says that expenses are higher with variable annuities than typical mutual funds because of the additional 1% to 1.
Given the examination findings, the large number of enforcement cases over the past couple of years and the complexity of these products, we feel we can best protect investors by establishing stronger, more specific rules that apply specifically to variable annuities," NASD Chairman Robert Glauber said in a statement.
Preliminary data in the study "Variable Annuities: An Industry in Transformation" by Conning Research & Consulting, show the individual annuity industry returned a profit of $7 billion in 2003, primarily due to the swing on variable annuities.

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