Each month, the National Association for Fixed Annuities (NAFA) and The Index Standard track the performance of major indexes used in FIAs. These benchmarks help show the behavior of underlying markets connected to FIAs, including S&P 500 as well as risk-managed and multi-asset strategies.
It’s important to understand these results aren’t representative of actual FIA returns. Instead they reflect index performance before the insurer applies crediting rates, such as caps, spreads, and participation limits. While your actual credited rate will likely be lower, it will never be negative, since your principal is protected from market losses.
While the FIA index data helps you understand market potential, it doesn’t guarantee results. Your contract’s terms and crediting method will determine your credited interest.
Q4 2025 Performance Snapshot
NAFA’s year-end data highlights a clear divide between traditional market indexes and volatility-managed FIA benchmarks.
Equity Market Context
- S&P 500 Index: +16.1% (1-year)
- MSCI EAFE Index: +12.1% (1-year)
These gains reflect a strong year for equities overall.
Volatility-Controlled FIA Index Trends
Many indexes commonly used within FIAs, particularly those targeting 5% to 12% volatility, delivered single-digit or near-zero one-year returns. In some cases, returns were negative before product features were applied.
This outcome is not an error or underperformance in the traditional sense. It is the direct result of index designs that automatically reduce equity exposure during periods of uncertainty or rising volatility.
S&P 500 vs. Typical FIA Index: Why the Results Look So Different
S&P 500 Index (2025)
- Direct exposure to U.S. stocks
- Captured most of the market’s upside
- Experienced full market volatility
- One-year return: +16.1%
Typical FIA Volatility-Controlled Index (2025)
- Exposure adjusted to limit market swings
- Shifted away from stocks during higher volatility
- Prioritized stability over growth
- One-year returns often ranged from ~0% to single digits
This difference is intentional. FIA indexes are built to manage risk and smooth returns over time, not to track the stock market dollar-for-dollar.
Performance Snapshot (NAFA – December 2025)
| Index Type | Top Performers (Examples) | YTD / 1-Year Return Range | Highlights |
|---|---|---|---|
| Equity-Linked | S&P 500 (+16.1%), Nasdaq-100 (+23%), MSCI EAFE (+12.1%) | ~16%–23% (market indexes, not annuity credits) | Strong equity markets drove gains in traditional stock indexes, though these results do not reflect FIA caps or participation rates. |
| Risk-Controlled (7%–12%) | S&P 500 Daily Risk Control 10% (+8.5%), Nasdaq-100 Volatility Control 10% (+4.6%) | ~1%–9% Returns varied widely depending on volatility target and timing. | Volatility controls reduced equity exposure during market swings, resulting in smoother but smaller gains. |
| Multi-Asset / Balanced | Bloomberg Versa 10 (+7.7%), S&P MARC 5 (+5.2%), PIMCO Global Optima (+2.9%) | ~2%–8% | Diversified strategies benefited from equity strength and selective bond exposure, with wide dispersion based on index design. |
| Underperformers | SG AI Navigator (-8.2%), Smart Passage SG (-13.8%), WisdomTree Siegel Strategic Value (-4.7%) | Negative | AI-driven and global models struggled amid uneven volatility, allocation shifts, and currency pressures. |
Index performance does not represent actual annuity contract performance and does not include caps, participation rates, fees, or rider costs.
Market Context: Why FIA Index Results Look Different Than the Market
A common point of confusion for consumers is why FIA-linked indexes don’t closely track the S&P 500 or Nasdaq — especially in strong market years.
Built-In Volatility Controls
Most FIA indexes actively adjust exposure to stocks, bonds or cash based on market conditions. When volatility rises, the index may shift away from equities — limiting both losses and potential gains.
Risk Management Comes First
FIA indexes are engineered to smooth returns over time, not to capture full market upside. This design helps protect annuity owners from sharp drawdowns that can be especially harmful near or during retirement.
Index Returns Are Not Contract Returns
The performance figures shown in NAFA reports:
- Do not include caps or participation rates
- Do not reflect spreads or fees
- Do not account for optional income riders
Your actual annuity performance depends on the specific terms of your contract — not just the index itself.
What This Means for FIA Owners
If your fixed index annuity credited a modest return in 2025, that doesn’t necessarily mean it failed to perform as intended.
For many retirees and near-retirees:
- Avoiding losses can be more important than chasing higher gains
- Predictable outcomes help support long-term income planning
- Reduced volatility can provide peace of mind during uncertain markets
In years like 2025, when stocks rise sharply, FIAs may lag traditional investments. But in down or highly volatile markets, that same structure can help preserve accumulated value.
A Real-World Perspective
Consider two hypothetical investors:
- Market Investor: Fully invested in stocks, benefiting from strong gains in 2025 — but exposed to future downturns.
- FIA Owner: Earned a lower credited rate in 2025, but avoided market losses and maintained principal protection.
Neither approach is inherently right or wrong. The difference comes down to priorities: growth potential versus risk control and income stability.
How To Interpret FIA Index Reports
Each FIA credits interest based on a set of rules that translate index performance into your account growth. Here’s a quick refresher:
| Term | Meaning | Example |
|---|---|---|
| Cap | The maximum percentage you can earn in a crediting period. | If the cap is 8% and the index rises 10%, you’ll earn 8%. |
| Spread | The amount subtracted before interest is credited. | With a 2% spread, a 6% index return yields 4%. |
| Participation Rate | The percentage of index gain you receive. | A 70% participation rate on a 10% index gain = 7% credit. |
When market volatility rises, insurers often adjust participation rates to maintain balance. Reports like NAFA’s give a helpful snapshot of how indexes are performing, but it’s your annuity’s crediting terms that tell the real story. Over time, FIAs are built for consistency, not short-term spikes.
Stephen Kates, CFP®Principal Financial Analyst for Annuity.orgStephen Kates, CFP® is a personal finance expert specializing in financial planning and education. He serves as the Principal Financial Analyst for Annuity.org, where he delves into industry trends to support consumers and financial advisors on wealth management, annuities, retirement planning, and investing.
What To Do Next
The December 2025 FIA report shows opportunity and caution in equal measure. Equity-linked indexes remain strong, while volatility-controlled options are holding steady.
If you’re considering a fixed index annuity or already own one, now is the perfect time to review your crediting rates and determine whether newer contracts offer better growth potential.
Get Guidance Before You Decide
