Created to strengthen variable annuity sales, this optional feature guarantees a guaranteed minimum of annuity payments regardless of how the market performs while the annuity contract is in force. The value of this feature is usually stated as a specific interest rate compounded annually on the initial investment or series of payments.
Available at an additional charge, with living benefit riders, the set payout base is either a rollup equal to premiums credited with an interest rate, or a step-up, which locks in a maximum anniversary value (subject to an age cap). Though provisions vary among insurers, on the 10th contract anniversary (or later), variable annuity contracts may be converted to a guaranteed amount of income, and investor can begin taking income from the contract.
Investors must decide which income benefit option meets their needs:
(Note: Increasing Payment Option – An increasing payment option typically may be added to any of the other three income benefits through which income payments increase by one, two or three percent a year to help adjust for inflation.)
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