Hybrid annuity

Hybrid annuity

Hybrid annuities offer individuals a unique investment option combining guaranteed income with growth potential. By understanding how these annuities work and the benefits they provide, individuals can make informed decisions about their retirement savings and ensure a secure financial future. 

What is a hybrid annuity? 

A hybrid annuity is a type of investment product that combines the features of both traditional fixed annuities and variable annuities. It offers a unique combination of guaranteed income and potential for growth. In the US, hybrid annuities are becoming increasingly popular among individuals looking for a secure and reliable way to save for retirement. 

Hybrid annuities offer a guaranteed income for life with growth potential, which can appeal to investors seeking a steady income stream and some upside potential. However, the higher costs, limited growth potential, and lack of liquidity are some drawbacks of this type of investment. Investors should consider their financial goals and risk tolerance before investing in a hybrid annuity. 

Understanding hybrid annuity 

One of the critical features of hybrid annuities is the ability to provide a guaranteed income stream for life. This is achieved through the fixed annuity component of the product, which offers a predetermined interest rate over a specified period. This provides the investor with a stable and predictable source of income, even if the market experiences fluctuations. 

In addition to guaranteed income, hybrid annuities provide growth potential via the variable annuity component. This component enables the investor to allocate a percentage of his investment to bonds, stocks, or mutual funds. The outcome of these investment alternatives will determine the annuity’s growing potential. This feature allows investors to participate in market growth while maintaining the security of a guaranteed income source.

Working on Hybrid Annuity 

As their name suggests, hybrid annuities are merely combinations of two or more fundamental annuity contract types. A variable and a fixed annuity contract are often combined and kept inside the same chassis. A variable annuity in a contract segment is intended to allow the client’s capital to expand in the mutual fund sub-account component of the agreement while guaranteeing a fixed amount of revenue that the client cannot outlive. 

The way hybrid annuities work is relatively straightforward. When a person buys a hybrid annuity, he make an initial investment in the contract. This investment is then split into two parts: the fixed annuity component and the variable annuity component. 

The fixed annuity portion will pay the investor a fixed interest rate for a period. This interest rate is usually more significant than regular savings accounts or certificates of deposit. The variable annuity component, on the contrary, allows the investor to select from various investment possibilities that define the annuity’s growth potential. 

With time, the investor will receive monthly income distributions from its hybrid annuity. These payments will mix the guaranteed revenue from the fixed annuity component and any increase generated by the variable annuity component. The quantity of income received is determined by factors such as the initial investment size, the success of the selected investment alternatives, and the period the annuity has been kept. 

Advantages of hybrid annuity 

Along with the typical characteristics of other forms of annuities, hybrid annuities provide a few significant advantages to clients. Due to their dual nature and the inflation protection offered by the growth component, customers may expect a guaranteed increase in income.  

As the fixed part will continue to pay out regardless of how the variable subaccounts perform, contracts that mix a fixed and variable annuity offer customers a lower amount of downside exposure than a variable annuity alone. 

 One of the primary benefits of a hybrid annuity is that it gives an income guaranteed for life, which may be advantageous for retirees or persons who wish to ensure a consistent cash flow throughout their retirement years.  

Further, hybrid annuities allow investors to participate in the potential development of the underlying assets, which can help balance the impact of inflation and improve the annuity’s total value. Combining guaranteed income and growth potential for many investors makes hybrid annuities an appealing option. 

Disadvantages of hybrid annuity 

Retirement planners have long utilised annuities to offer assured income and tax-deferred growth. But the fact that these items aren’t liquid instruments is one of the primary criticisms that most detractors level at them. 

There are some drawbacks to hybrid annuities as well. One of the most significant disadvantages is that it might be more expensive than other annuities or investment possibilities. Hybrid annuities frequently have more significant fees and expenditures, which might diminish total returns and influence the investor’s cash flow.  

Also, compared to alternative investment options such as mutual funds or individual equities, the prospect for the growth of hybrid annuities may be limited. This implies that investors might only profit partially from the market’s potential rise.  

Hybrid annuities often have a lengthier lock-in term, which means investors may be unable to access their cash for an extended period. This lack of liquidity can be detrimental to those who require access to their assets in the event of an emergency or unforeseen expenditure. 


Frequently Asked Questions

An example of a hybrid annuity could be a retirement plan that offers a fixed payout during the initial years, ensuring a stable income for retirees. However, as the years go by, the annuity may also have a variable component that allows for potential increases in income based on market performance. This combination of stability and growth makes hybrid annuities an exciting option for individuals looking to secure their financial future. 


  • Fixed annuity 

It is over a predetermined period, and it offers an assured rate of return. Individuals who seek a steady and regular income stream can opt for this kind of annuity.  

  • Variable annuity 

It enables people to invest in various assets, including stocks and bonds. Although this kind of annuity entails more risk, it also has the potential for more significant rewards.  

  • Indexed annuity 

It provides the possibility of increased returns depending on the performance of a specific market index and is linked to that index. 

  • Immediate annuities 

It delivers a consistent revenue stream immediately following the first investment. Retirees who wish to augment their retirement income frequently choose these annuities. 

In a split-funded annuity, the remaining capital is saved to support a deferred annuity while part of the principal is used to make monthly payments that begin right away. 

A classic example of a hybrid fund is a balanced fund, which generally holds 60% equities and 40% bonds. 

It gained significance as HAM produced better outcomes than the BOT model. The nation’s infrastructure expenditures may be improved as a result. Better and more efficient commuting may result from it.  

Related Terms

    Read the Latest Market Journal

    Navigating the Post-Inflation Landscape in 2024: Top 10 US Markets Key Events to Look out for

    Published on Feb 23, 2024 58 

    Start trading on POEMS! Open a free account here! In 2023, the United States experienced...

    From Boom to Bust: Lessons from the Barings Bank Collapse

    Published on Feb 23, 2024 20 

    Barings Bank was one of the oldest merchant banks in England with a long history...

    Decoding FX CFD 2.0

    Published on Feb 20, 2024 61 

    This article is aimed at availing information and knowledge essential to intermediate forex traders. It...

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 81 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlock Prosperity with 5 Sure-Fire Financial Instruments!

    Published on Feb 14, 2024 189 

    In Singapore, the concept of guaranteed returns may evoke the spirit of prosperity, reminiscent perhaps...

    Weekly Updates 12/2/24 –16/2/24

    Published on Feb 13, 2024 69 

    This weekly update is designed to help you stay informed and relate economic and company...

    Decoding FX CFD

    Published on Feb 7, 2024 97 

    The foreign exchange market commonly known as the forex or FX market, is a cornerstone...

    Chinese New Year: Three Cases For CFD Trading

    Published on Feb 6, 2024 141 

    The Chinese New Year is a festive season may be celebrated by some parts of...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com