Accumulation Unit

Accumulation units represent the value of a variable annuity’s underlying investments during the accumulation phase. Like mutual fund shares, the prices of accumulation units change each day as the market fluctuates. The number of accumulation units in an annuity remains constant throughout the annuity’s term.

Headshot of Jennifer Schell, writer for
  • Written By
    Jennifer Schell, CAS®

    Jennifer Schell, CAS®

    Financial Writer, Certified Annuity Specialist®

    Jennifer Schell is a professional writer focused on demystifying annuities and other financial topics including banking, financial advising and insurance. She is proud to be a member of the National Association for Fixed Annuities (NAFA) as well as the National Association of Insurance and Financial Advisors (NAIFA).

    Read More
  • Edited By
    Lamia Chowdhury
    Headshot of Lamia Chowdhury, editor for

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial editor at Lamia carries an extensive skillset in the content marketing field, and her work as a copywriter spans industries as diverse as finance, health care, travel and restaurants.

    Read More
  • Financially Reviewed By
    Brandon Renfro, Ph.D., CFP®, RICP®, EA
    Brandon Renfro, Ph.D., CFP®, RICP®, EA, expert contributor

    Brandon Renfro, Ph.D., CFP®, RICP®, EA

    Co-Owner of Belonging Wealth Management

    As a Certified Financial Planner™ professional and Retired Income Certified Professional®, Brandon Renfro is well-versed in the financial information and strategies needed to meet retirement goals. In addition to co-owning Belonging Wealth Management and assisting clients, Brandon writes regularly for financial publications.

    Read More
  • Updated: November 17, 2023
  • 4 min read time
  • This page features 7 Cited Research Articles

Key Takeaways

  • When you purchase a variable annuity, your premium is invested in subaccounts of various stocks and bonds.
  • The value of these subaccounts can be calculated using accumulation units, which change in price according to fluctuations in the subaccounts’ investments.
  • Accumulation units are different from income units, which pay out dividends and interest to the investor.

Variable annuities bear some resemblance to mutual funds, but there are significant differences between these financial products. Specifically, the value of an accumulation unit is not the same as the value of a mutual fund share.

Likewise, an accumulation unit is not the same thing as an income unit. In order to understand and assess the value of a variable annuity subaccount, you need to know the difference between these terms.

Understanding terms like accumulation units, income units, and others is essential for understanding how your annuity will grow or pay out income. This helps you plan correctly, and can prevent confusion that may lead to poor outcomes.

How Do Accumulation Units Work?

Accumulation units measure the value of a variable annuity’s subaccounts during the contract’s accumulation phase. The value of the units reflects the performance of the underlying stocks and bonds that make up the variable annuity’s portfolio.

When you “allocate annuity assets” in a deferred variable annuity, you are essentially buying units of a subaccount, or accumulation units. Unlike investors who buy shares of a mutual fund, annuity owners are not shareholders.

The insurance company is the shareholder of the mutual fund and, subsequently, the recipient of any interest or dividend distributions. The annuity owner, on the other hand, is not entitled to any interest or dividends.

Helpful Terms

Accumulation Unit Value (AUV)
The value of each unit in the variable account.
Net Asset Value (NAV)
The value of each share of the mutual fund.
The separate account of a variable annuity.
Mutual Fund
An investment company that pools money from many investors and invests it based on specific investment goals (FINRA).
Deferred Variable Annuity
A variable annuity that begins paying income after a period of accumulation.

The number of accumulation units remains constant throughout the annuity’s term; only the price of the units changes to reflect portfolio performance. If the variable annuity’s investments fall, the accumulation unit value also falls. This means that the annuity’s value is lower, even though the number of units remains the same.

“For example, assume the unit value of XYZ fund is $100. If you invest $10,000 in this fund, because the unit value is $100, you will have 100 accumulation units of XYZ fund,” Elle Switzer, Director of Annuity Product Management at TruStage, told

“If you don’t make any withdrawals or transfers, the accumulation units will stay constant at 100, but the unit value of the fund changes daily,” Switzer said. “Therefore, to calculate your account value on any given day, you multiply the accumulation units by the current unit value.” 

To help investors understand how their variable annuity contract works, the U.S. Securities and Exchange Commission requires that all variable annuities be accompanied by a prospectus, which explains the investment objective and the methods for assessing the value of the variable accounts.

Step 1
Step 2
Step 3
Step 4

How soon are you retiring?

Step 1
Step 2
Step 3
Step 4

What is your goal for purchasing an annuity?

Select all that apply

Income Units vs. Accumulation Units

Mutual fund investors may be familiar with income units, which distribute the interest and dividends that shareholders earn. Many investors use these units to access regular income from their mutual fund portfolio.

Income units are not the same thing as accumulation units because accumulation units do not distribute income; instead, they are reinvested back into the variable annuity’s subaccounts. 

Although variable annuity subaccounts may contain shares of mutual funds, a variable annuity owner will not receive the income units from those funds because the annuity owner is not the shareholder.

However, you may hear someone discussing income units in the context of a different type of annuity. Immediate annuities, which convert premiums to income right away, don’t have an accumulation period. People who purchase immediate annuities for an income stream that begins right away are not counting on the annuity value to grow. The value of their annuities is measured in income units, also referred to as annuity units.

This is why it’s important to have a clear goal for your annuity. If you don’t know your objectives for any type of annuity or investment, you may wind up with an annuity that doesn’t fit your financial needs.

When a deferred variable annuity is annuitized, the accumulation units are converted to income units and earnings are no longer reinvested for compound growth.

Is An Annuity Right For You?

Our short quiz provides clarity on whether an annuity is a smart choice for your retirement portfolio.

Frequently Asked Questions About Accumulation Units

Are accumulation units better than income units?

Both accumulation and income units serve a purpose in your financial plan. Income units can be a way to generate regular income from your investments, while accumulation units ensure that your savings continue to grow.

Do accumulation units pay dividends?

Unlike income units, accumulation units do not pay dividends or interest.

What is the difference between annuity units and accumulation units?

Accumulation units measure an annuity contract’s value during the accumulation phase, while annuity units measure how much value the contract holds once it begins distributing payouts.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: November 17, 2023
Annuity agent on a phone call
Learn About Top Annuity Products Get a Free Annuity Quote from a Licensed Agent
Annuity rates on a screen
Find Today's Best Annuity Rates Compare Today's Best Annuity Rates
Mockup of laptop with annuity calculator page displayed
Calculate Your Annuity Payout Calculate Your Annuity Payout