Annual Reset

Annual reset is a term that refers to a fixed indexed annuity crediting method. Indexed annuities credit a level of interest to the contract owner, and this level of credited interest can be indexed or linked to the performance of equity markets. Annual reset means that the level of credited interest is based on the difference in an index value over the course of a year. For example, assume that the reference index begins the year at 700. Next, assume this index increases to 750 at the end of the year. The difference is 50 points which is 7.14 percent of the index value at the beginning of the year. In this case, the contract owner would likely be credited a level of interest that is some portion of the 7.14 percent based on an interest cap or participation rate. This annual reset process would start again the following year and repeat each subsequent year.