What typically happens to variable annuity payments if the investment performance exceeds the assumed interest rate?

When the investment performance of a variable annuity exceeds the assumed interest rate, the payments to the annuitant typically increase. This is because variable annuities are designed to provide benefits that vary based on the performance of the investment options chosen by the owner.

As the underlying investments perform well and generate returns greater than the assumed interest rate, this positive performance has a direct impact on the annuity's cash value and the potential payout amounts. Therefore, when investment performance is strong, the annuity can produce higher payments, benefiting the annuitant financially.

The structure of variable annuities allows for this connection between investment performance and payment amounts, making them different from fixed annuities that would maintain stable payments regardless of market conditions. This characteristic is essential in understanding the potential for income variability in variable annuities.