In addition to the
premium
you pay to purchase a deferred
variable annuity, there are ongoing fees that cover the services and benefits your contract provides. Typically there are also
surrender charges
if you end your contract or withdraw within the first few years.
Details of the charges that apply, how they are calculated, and when they are subtracted from your account value are included in the
prospectus
that you should read before purchasing an annuity.
Types of variable annuity fees
All annuity issuers charge contract holders fees that cover overhead, sales and marketing, and the general cost of doing business. You may also pay an annual administrative fee, which some contract providers waive once the amount of premium you’ve paid reaches a certain minimum, such as $50,000. In addition to these charges, variable annuities may also charge the following fees:
Asset-based
management fees, which pay the investment portfolio
managers and certain operating expenses. They’re
deducted from the value of your account daily or
on the schedule described.
Transaction
fees, sometimes called transfer processing fees, if you transfer money among your portfolios more frequently than the contract allows.
Mortality and expense (M&E) risk fees, which are charged on
all variable annuity contracts.
They pay for:
The guaranteed death
benefit, which is subject to the claims-paying ability
of the issuer
The option of a lifetime
payout
Guaranteed
insurance costs, which are frozen for the life of
the contract
Surrender fees if you withdraw all or part of your contract value or if you terminate the contract in the early years.
The return of premium benefit — also known as the death benefit — guarantees the return of your investment if you die during the accumulation period, regardless of how your investment has performed.
Asset-based
management fees, which pay the investment portfolio
managers and certain operating expenses. They’re
deducted from the value of your account daily or
on the schedule described.
