Variable Annuity

Calculate the initial income payment, with future payments fluctuating based on actual returns compared with the AIR — The assumed interest rate (AIR) is the rate used to compute the first income payment in a variable annuity. After annuitization, the insurer compares actual separate account performance with the AIR: if actual returns exceed the AIR, income payments increase; if returns fall short, payments decrease. The AIR is therefore a benchmark against which actual performance is measured, not a guarantee. It is precisely this mechanism that makes variable annuity income vary.

National insurance concept

Accumulation units, whose value fluctuates with the performance of the underlying subaccounts — In a variable annuity's accumulation phase, premiums purchase accumulation units. The value of each accumulation unit rises and falls with the investment performance of the subaccounts the owner selected. At annuitization, the accumulated value is converted into annuity units, and income payments are then made based on the number of annuity units and their fluctuating value. This unit structure is how market gains and losses are passed through directly to the owner.

National insurance concept