a b c d e f g h i j k l m n o p q r s t u v w x y z Accumulation Unit Value (AUV) - The value of the underlying portfolio (less any charges) divided by the number of outstanding units.
Annuitant - A person entitled to receive annuity benefits.
Annuity - A contract that allows you to invest money and have it grow on a tax-deferred basis. Annuities are either fixed or variable--or a combination of fixed and variableand can require lifetime or period payments.
Beneficiary - Person chosen by the annuitant to receive the proceeds from the annuity in case of the annuitant's death.
Bond - Interest paying certificate issued by a government, public agency or corporation, promising to pay the holder a specified sum on a specified date.
Certificate Owner
The person or entity that purchases the annuity.
Contingent Annuitant - A person who will receive annuity payments in case the first annuitant dies before annuity payments begin.
Contingent deferred sales charge (CDSC) - The charge deducted from the annuity for withdrawing purchase payments in excess of allowed limits or upon full surrender of the annuity contract.
Deferred Annuity
An annuity contract where premiums are accumulated with interest and then used to provide periodic payments at a future date.
Direct Rollover
A transfer that qualifies as a rollover, but is done directly from one company to another. Usually, it is from a qualified plan into an IRA . It is reportable, but not taxable. The annuitant can avoid having taxes taken out of the eligible distribution by having a direct rollover.
Effective Interest Rate
AKA: Annual Effective Rate or Annual Effective Yield. The interest rate earned if compounded annually. If a person has $10,000 and leaves it for one year at an effective rate of 10%, they will earn $1,000 of interest. The interest rate for one day when compounded daily is approximately 0.0261%. Note that 10% divided by 365 days is approximately 0.274%.
Expected Life
Number of years a person is expected to live, given their current age. The expected life is usually obtained from a mortality table.
Fixed annuity - An insurance contract in which the insurance company guarantees your principal and locks in a rate of return for a fixed period of time.
Flexible Premium Annuity
A deferred annuity contract that allows the owner to make continual payments. The amounts and times of these payments are often left completely up to the owner. Interest is paid from the date they are received and the amount available to annuitize is dependent on when and how much is received.
Interim value The value of an investment in a fixed option before application of any market value adjustment.
Market value adjustment - The gain or loss incurred for withdrawing money from a fixed-rate option prior to maturity.
Money market portfolio - A portfolio that aims to earn income by investing in short-term securities issued by governments or corporations. These portfolios seek stability of principal. They differ from bank market rate accounts, which are bank deposits and are FDIC insured up to applicable limits.
Money market instruments - Short-term debt securities issued by corporations, governments or public agencies.
Owner/Participant - The individual who owns an annuity contract and makes purchase payments.
Periodic Transfer
This is a transfer from one company to another pursuant to IRS Ruling PL102-318. It allows for the transfer of the money from one company to another over a period of time of substantially equal payments. Most are set up as monthly, however they can be quarterly or annually. Effectively, a policyholder annuitizes their policy, but has the proceeds sent as a transfer to another company to purchase an annuity there rather than receiving the payments as income.
Principal - The amount of money you put into an investment.
Purchase payment - A contribution to or an investment in an annuity.
Rollover
Money that originally came from a qualified plan, was distributed to the owner, and is now being placed in an eligible qualified plan. Most often the plan it is being placed into is an IRA. These are reportable to the IRS, but not taxable.
Single Premium Annuity
Annuity purchased with a payment of one lump sum premium.
Surrender Value
Is equal to the accumulated value less any surrender charges specified in the contract.
Stock (equity) - A unit of ownership in a company. When you buy a stock, you become a part-owner of the company whose stock you purchase. Stock is equity.
Tax Sheltered Annuity (TSA)
An employer sponsored retirement savings program limited by law to employees of public educational organizations and certain nonprofit organizations.
Underlying portfolios - (portfolios within a variable annuity) These portfolios are available only within variable insurance products and are not available for purchase by the general investing public.
Variable Annuity - An insurance annuity contract offering both variable and fixed-rate investment options. The return on investment in a variable option is not fixed but fluctuates with the market.
1035 Exchange
Pursuant to IRS Section 1035, allowing the exchange of contracts without losing the tax-deferred status of the interest. Must be an exchange of the entire contract, and must be a direct company to company transfer. Permissible exchanges include: annuity to annuity, life to annuity, life to life, endowment to endowment and endowment to annuity.
403(b) Plan
Tax Sheltered Annuity.
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