Deferred Variable Annuity Inflation Adjustment Factor
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Solution Overview
Problem
Conventional deferred variable annuity products do not provide lifetime benefit payments that account for inflation, leading to a lack of protection against inflationary effects on retirement benefits.
Innovation Solution
A data processing method that calculates lifetime benefit payments using the formula LBP withdrawal = (Withdrawal Percent) × (Withdrawal Base) × (Inflation Adjustment Factor), where the withdrawal percent is predetermined and the inflation adjustment factor is modified over time, related to the number of deferred years until the first lifetime benefit payment withdrawal.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If conventional deferred variable annuity products are used, then the annuity provides lifetime benefit payments, but the payments do not account for inflation and lack protection against inflationary effects
Solution Approach 1:
The patent applies parameter changes by modifying the benefit payment calculation to include an inflation adjustment factor. The formula transitions from a static calculation to a dynamic one that incorporates inflation rates, thereby adapting the payment amount to maintain purchasing power over time while managing the complexity through structured parameter integration.
2Reliability
If an inflation adjustment factor is introduced to account for inflation, then lifetime benefit payments are enhanced and keep pace with inflation, but the calculation complexity increases
Solution Approach 1:
The patent introduces an intermediary mechanism by using a predetermined table of inflation adjustment factors. This table serves as a mediator between the complex inflation calculation process and the final benefit payment, simplifying the implementation while maintaining accuracy. The table pre-calculates adjustment factors based on various deferral periods and inflation scenarios, reducing real-time computational complexity.
3Productivity
If the inflation adjustment factor is modified over time based on deferred years, then payments increase to keep pace with inflation, but the administrative complexity increases
Solution Approach 1:
The patent applies preliminary action by pre-determining inflation adjustment factors in a table format before they are needed for benefit calculations. The factors are pre-calculated based on various deferral periods and inflation assumptions, allowing for straightforward lookup and application during the benefit payment phase without requiring complex real-time calculations or modifications.
Data Source
AI summary
A computer implemented data processing system and method processes data associated with a deferred variable annuity contract during the accumulation phase for a relevant life. The data includes a payment base value, a contract value, a withdrawal percent and a formula for determining an available benefit payment amount without reduction of the payment base value. The formula includes as factors the payment base value, the withdrawal percent, and an adjustment factor dependent on a period of deferral from a time a benefit payment withdrawal was first available until a first benefit payment withdrawal request and a period of time since the first benefit payment withdrawal request.