How Do The Different Crediting Methods Work?
The high point (high water mark) term annuity locks in the highest level of the index during the term and credits any gain for the period based on the participation rate in effect at the time of purchase; the point-to-point annuity uses the ending value of the index. Example: If the high point or point-to-point annuity had a participation rate of 75% and the index moved from 100 to 150 by the end of the term, a 50% increase, the annuity would credit a gain of 37.5% (50% x 75%) for the term. However, if the value of 150 was the highest anniversary value and the index value at the end of the term was 140, the high point term would use the 150 value as the end point. The point-to-point annuity does not lock in gains until the end of the term and its calculation would reflect the 140 ending index value. The term yield spread annuity usually computes the annual effective yield based on the highest anniversary level of the index during the term and then deducts a guaranteed yield spread to d
