Accumulation Unit


DEFINITION of 'Accumulation Unit'

1) In the case of a variable annuity, a measurement of the value invested in the account during the accumulation period of the contract. The more funds you contribute to your annuity account, the more accumulation units you will build.

2) In the case of a unit trust, a type of investment structure where the trust's income is directly reinvested into the trust, instead of being paid out as cash to the investor.

BREAKING DOWN 'Accumulation Unit'

1) Accumulation units are used to accurately measure the value of contributions by the annuitant. In times when the variable annuity's investments dip, a fixed amount of funds will buy more accumulation units than when the securities are more highly priced, just as investors are able to by more shares of cheaper stock than they can of higher priced stock with the same amount of currency.

2) Accumulation units within a unit trust can be reinvested back into the trust via boosting the unit price, or issuing additional units to investors. Either way, the investor is able to reinvest their share of profits back into the trust.

  1. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Reinvestment

    Using dividends, interest and capital gains earned in an investment ...
  3. Unit Trust - UT

    An unincorporated mutual fund structure that allows funds to ...
  4. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  5. Separate Account

    1. A privately managed investment account opened through a brokerage ...
  6. Unit Investment Trust - UIT

    An investment company that offers a fixed, unmanaged portfolio, ...
Related Articles
  1. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  2. Taxes

    Designating A Minor As An IRA Beneficiary

    Leaving liquid assets like cash or securities to minors can be a complicated procedure. Make sure you understand how your gift will be distributed, managed and taxed.
  3. Options & Futures

    20 Investments You Should Know

    To take advantage of all your investing options, you need to know what your choices are. Here we tell you about the diverse features and advantages of 20 different financial instruments.
  4. Insurance

    Life Insurance & Annuities: Sound Investments?

    There are certain scenarios in which investing in insurance is a savvy move. But expect a big chunk of your money to go toward fees.
  5. Insurance

    Biggest Life Insurance Companies in the US

    Read about the top life insurance companies in the United States as measured by written premiums and learn a little more about their business operations.
  6. Professionals

    How Retirees Should Prepare for a Rate Hike

    Janet Yellen has indicated that there will likely be a rate hike later this year. Here's how retirees should prepare.
  7. Investing Basics

    How to Spot a Bad Annuity

    Investors who like a reoccurring income stream that comes from an annuity have to be careful. They aren't created equal and some should be avoided.
  8. Insurance

    All About Impaired Risk Annuites and Insurance

    What are impaired risk insurance products and understanding life insurance rate classes, table ratings and flat extra premiums.
  9. Professionals

    How Fixed Index Annuities Yield Retirement Income

    For investors worried about outliving their income in retirement, fixed indexed annuities can help fill the gap. Here's how.
  10. Professionals

    The Pros and Cons of Hybrid Annuities

    An in-depth look on the pros and cons of hybrid annuities.
  1. What are the requirements that a trust needs to meet to be qualified?

    The requirements that a trust must meet to be qualified are as follows: The trust must be a valid trust under state law ... Read Full Answer >>
  2. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  3. What are the main kinds of annuities?

    There are two broad categories of annuity: fixed and variable. These categories refer to the manner in which the investment ... Read Full Answer >>
  4. What are the risks of rolling my 401(k) into an annuity?

    Though the appeal of having guaranteed income after retirement is undeniable, there are actually a number of risks to consider ... Read Full Answer >>
  5. How do I get out of my annuity and transfer to a new one?

    If you decide your current annuity is not for you, there is nothing stopping you from transferring your investment to a new ... Read Full Answer >>
  6. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!