Understanding Annuity Value

The price per annuity (PPAS) is a common comparison between annuities and variable annuities. In a fixed annuity the amount of principal you pay to a retirement plan is guaranteed each year. The cost per annuity or payment value of an investment will not change until the initial payment reaches a predetermined minimum amount. This means that if you are able to earn more money in the future, your annuity will be able to increase the payments it pays. However, the amount of return on your investment is based on your current and future earnings.


A lump sum received from a fixed annuity will equal the present value of future payments received from the annuity, based on a predetermined interest rate, discount rate, or the current rate. Since the present value of a lump sum received from a fixed annuity is equal to the current value at that time, a higher amount received today is always worth more than a lower amount received tomorrow.

An annuity payment schedule is a formula used to determine the amount of your annuity payments on a monthly, quarterly, semi-annually, and yearly basis. Most annuities have fixed schedules with a fixed payment amount.

Your annuitant’s return on the investment they made using their savings and/or other capital is determined by the interest rate of the annuity. The rate is usually set as an annual percentage rate called the Annual Percentage Yield (APY). Some annuities have a fixed rate for a pre-determined period of years. Other annuities can be adjusted for inflation. With an adjustable-rate annuity (ARM) the initial premium payments are not determined until after the market value of the annuities has reached a certain level.

The payment value, also known as the surrender value, is the amount of cash the annuitant receives from the annuity payment. This amount will be less than or greater than the surrender value. It will also include any applicable fees and charges. In a variable annuity (PA) the amount of cash you receive is also determined by the interest rate, discount rate, and the duration of the annuity.

As mentioned, the payment value is determined by the current and future payments received but is also determined by the interest rate, discount rate, and the duration of the annuity. You can use the calculation tools available on the internet to determine the payment value for your annuity. Most of them will offer the service free of charge. If you are unable to find a calculator online that offers the payment value for your annuity, it is always advisable to contact your provider.