The Base For Governing Payment Of Annuities

The traditional annuity agrees to pay a fixed sum of money monthly for a certain length of time or for the life of one or more persons. Persons under such a contract may suffer a reduction in real income if the value of the dollar decreases in terms of what it will buy. In other words, a fixed annuity provides poor protection against the effects of inflation. As a result of some dissatisfaction with the fixed annuity, the New York legislature passed an act in
1952 which established the College Retirement Equities Fund
(CREF) as a nonprofit organization to provide variable based annuities for the retirement income plans of college and university teachers. Since that time the concept has gained widespread acceptance. Instead of fixed benefits, the variable annuity provides benefits which fluctuate according to the value of the insurer’s annuity fund, which has been invested in common stocks and bonds. As with any annuity, the variable contract has two stages