Question of the Week
The Shur-Gro variable annuity uses an AIR of 3% for those contract holders who are in the annuity stage. The past few months, the actual returns created by the separate account have been, respectively; 6%, 5.5%, 4% and 3.5%. Which of the following is a true statement regarding the payouts to annuitants?
A) Payments have not been affected
B) Payments have increased
C) Payments have steadily decreased
D) Payments have remained level
The correct answer is b.
Any time the actual growth rate of the separate account exceeds the account’s AIR, the payment will increase compared to the previous month’s payment. Note that the mathematical reason for this is far beyond the scope of Series 6 exam.