During the accumulation phase, a deferred fixed annuity pays a fixed interest rate on the value of the annuity. The insurance company generally guarantees to credit a current, competitive rate of interest for a specified period of time, such as one year.

At the end of that time period, the company can change the interest rate guarantee, but never below a minimum guaranteed rate specified in the contract.

During the distribution phase, a fixed annuity, whether immediate or deferred, guarantees to pay the annuitant a fixed income each payment period.

The hallmarks of fixed annuities are their guarantees. While the interest rate credited during the accumulation phase may increase or decrease, it can never fall below a minimum guaranteed rate. In addition, the value of the annuity can only increase, with the rate of increase determined by the rate of interest credited to the contract. Finally, at distribution, the income payments are fixed and guaranteed for life.

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