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.

RELATED TERMS
  1. Annuity Unit

    An accumulation unit for which the annuitant has annuitized their ...
  2. Accumulation Phase

    1. A period of time when an annuity investor is in the early ...
  3. Unit Trust - UT

    An unincorporated mutual fund structure that allows funds to ...
  4. Equity Unit Investment Trust

    A registered trust in which investors purchase units from a fixed ...
  5. Accumulated Income

    The portion of net income that is retained by a corporation instead ...
  6. Annuitization Phase

    The period when the annuitant starts to receive payments from ...
Related Articles
  1. Professionals

    Valuation of Variable Annuities

    FINRA Series 6: Section 11 Valuation of Variable Annuities. This section discusses the Accumulation Phase and Annuitization Phase in the valuation of Variable Annuities.
  2. Mutual Funds & ETFs

    Unit Investment Trusts

    Unit Investment Trusts
  3. Professionals

    Types and Valuation of Variable Annuities

    FINRA/NASAA Series 26 Section 3 - Types and Valuation of Variable Annuities. This section discusses immidiate and deferred annuities, and the accumulation and annuitization phases.
  4. Professionals

    Variable Annuities

    NASAA Series 65: Section 10 Variable Annuities. In this section vaiable annuity structure and taxation.
  5. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  6. Retirement

    How a Variable Annuity Works After Retirement

    These investments can provide extra income after you retire. Here’s a guide to when and how you will receive the payout.
  7. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  8. Retirement

    How a Fixed Annuity Works After Retirement

    These popular investments can provide a steady stream of income during your retirement years. Here are the details.
  9. Retirement

    Annuities: How To Find The Right One For You

    Fixed, variable and indexed annuities offer different features. Find out which one fits your needs.
  10. Professionals

    Fixed vs. Variable Annuities

    FINRA/NASAA Series 26 Section 3 - Fixed vs. Variable Annuities. This section discusses the differences between fixed and variable annuities.
RELATED FAQS
  1. Which of the following are major differences between accumulation units and annuity ...

    The correct answer is d. All of these are differences between accumulation and annuity units. In addition, there are a fixed ... Read Answer >>
  2. Are variable annuities tax deferred?

    Learn how variable annuities are tax-deferred, but also understand some of the less advantageous tax implications from purchasing ... Read Answer >>
  3. What are the risks of annuities in a recession?

    Distinguish between the most common types of annuities, and understand which types of annuities pose the most risk during ... Read Answer >>
  4. What are the main kinds of annuities?

    Learn about the four basic types of annuities, and why the different investment and payout options are suitable for different ... Read Answer >>
  5. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ... Read Answer >>
  6. My variable annuity account took a beating. Should I seek other alternatives?

    This depends on several factors, you should ask yourself, the insurance company, or your adviser the following questions ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center