Understanding Market Value Adjustment (MVA) in (MYGAs)

When researching annuities, one of the most common questions people ask is: “What is a Market Value Adjustment (MVA), and how does it affect me?” If you’re considering a Multi-Year Guaranteed Annuity (MYGA), it’s important to understand how this feature works, especially if you think you may need access to your money before the end of your surrender period. 

What is a Market Value Adjustment (MVA)?

A Market Value Adjustment (MVA) is a feature that may impact the amount you receive if you take money out of your MYGA during the surrender charge period.

• When it applies: An MVA may apply if you surrender (cancel) your annuity or withdraw more than your penalty-free withdrawal amount during the surrender charge period.
• When it doesn’t apply: An MVA does not apply in every situation. For example, it does not apply if you pass away, if you annuitize your contract (turning it into a stream of income), or once the surrender charge period ends.

In other words: if you keep your MYGA for the full term, the MVA is something you may never encounter.

How Does an MVA Work?

The MVA is designed to reflect how changes in interest rates affect the value of the underlying assets that back your annuity, similar to how bond values move when interest rates change.

• If interest rates have gone up since you purchased your annuity, your surrender value may be adjusted downward (negative adjustment).
• If interest rates have gone down since you purchased your annuity, your surrender value may be adjusted upward (positive adjustment).

Think of it as a mechanism intended to align the value of early withdrawals with current market conditions, so neither you nor the insurance company experiences an unfair gain or loss when money leaves the contract early.

Why Does This Matter to You?

For most annuity owners, the MVA will not generally apply because they plan to keep their MYGA until maturity. But it’s important to know about it because:

• It supports long-term planning. MYGAs are designed for people who can commit their money for a set number of years. The MVA helps maintain rates competitive by discouraging early withdrawals.
• It can sometimes work in your favor. If rates have fallen since you bought your MYGA, the MVA could actually increase your surrender value.
• It’s part of your contract. Understanding how and when an MVA applies can help you avoid results if your circumstances change.

Putting It in Perspective

Imagine buying a bond. If you try to sell it early and interest rates have gone up, you’ll generally get less than what you paid. If rates have gone down, your bond may be worth more. The MVA works in a similar way, helping align your surrender value with current market conditions.

Key Takeaways

• The MVA only applies if you withdraw more than your penalty-free amount or surrender your contract during the surrender charge period.
• It does not apply after the surrender charge period, upon death, or when you annuitize.
• The adjustment can be negative (if rates have risen) or positive (if rates have fallen).
• For clients who hold their MYGA through maturity, the MVA typically does not apply. 

Disclaimers

Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue. 

HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.

Annuities issued by Oceanview Life and Annuity Company, 1331 17th Street, Suite 1050, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.

Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals.  Please review the contract for full details.  

This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company are not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such. 

Neither Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice. 

Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.

The IRS may impose a penalty for withdrawals prior to age 59 ½.

Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.

Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated.  Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.