Definition
A fixed account is the component of an annuity contract that credits a declared interest rate, supported by the assets of the insurer's general account, available within indexed annuities and variable annuities as one of the available crediting choices alongside index-linked or subaccount options.
Why it matters
The fixed account is the structural feature that lets a single annuity contract combine declared-rate accumulation with index-linked or subaccount accumulation. It is what makes allocation decisions within a contract analytically meaningful — the share of contract value held in the fixed account behaves differently from the share held in indexed strategies or subaccounts, and the boundary between the two is a structural feature of how the contract is built.
How it works
A fixed account operates as a declared-rate component within a contract that also offers index-linked or subaccount components. The portion of contract value allocated to the fixed account credits the carrier's declared rate, with the carrier's general account standing behind the declared rate; the portion allocated to other components credits according to those components' rules. Contracts typically permit reallocation between the fixed account and other components on contract anniversaries or under other contractually specified conditions. The fixed account is supported by the same general-account assets and embedded-spread economics as a stand-alone fixed annuity; the indexed components are supported by the carrier's hedging program in addition to general-account economics.
In practice
For an individual holding a contract with both fixed-account and index-linked components, the share of contract value in each component is a structural decision with real consequences. Movement of value into the fixed account converts that portion to declared-rate accumulation; movement out of the fixed account exposes that portion to whichever index-linked rules apply. The contract's reallocation rules — what is permitted, when, and under what limits — govern how readily this can be done. A professional should explain the reallocation rules and how the declared rate on the fixed account compares to the declared rates on otherwise comparable stand-alone fixed annuities; a fixed account inside a multi-component contract is not always priced identically to a comparable stand-alone fixed annuity from the same carrier.
In the Longevity Standard Framework
Fixed account is supporting vocabulary in the Longevity Standard framework — the declared-rate component within a multi-component annuity contract that operates under the embedded spread cost structure. Embedded spread is one of five values that the cost-structure claim property can take, alongside none, explicit fee, crediting parameter drag, and guarantee charge. The cost-structure property determines how much of the structural pooling benefit reaches the participant; for the share of contract value in the fixed account, that determination operates through the declared rate and the carrier's general-account spread, while the share allocated to indexed or subaccount components operates under different cost-structure dynamics, which is why a multi-component contract effectively combines two cost-structure profiles within a single arrangement.
Related terms
- Declared rate
- General account
- Index crediting strategy
- Subaccount
- Separate account
- Cost structure
- Embedded spread
- Fixed indexed annuity