Dynamic Withdrawal Percentage for Annuity Benefit Security
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Solution Overview
Problem
Conventional deferred variable annuity products determine lifetime benefit payments based on a fixed withdrawal percentage, which does not automatically increase over the term of the contract, leading to potential decreases in benefit value as the contract value decreases.
Innovation Solution
A data processing method that calculates lifetime benefit payments based on a withdrawal percentage that automatically increases over the term of the annuity contract and with the age of the relevant life, ensuring greater monetary value and increased security for the annuitant.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If a fixed withdrawal percentage is used to calculate lifetime benefit payments, then the calculation method is simple and straightforward, but the benefit payments decrease over time as contract value decreases, reducing financial security for the annuitant
Solution Approach 1:
The patent applies the dynamics principle by making the withdrawal percentage dynamic rather than fixed. The withdrawal percentage automatically increases over the term of the annuity contract and with the age of the relevant life, allowing the system to adapt to changing conditions while maintaining computational simplicity through automated calculations.
Solution Approach 2:
The patent implements parameter changes by modifying the withdrawal percentage parameter over time. Instead of using a constant withdrawal percentage, the system changes this parameter based on the contract term and annuitant age, thereby increasing benefit payments in later years to offset inflation and medical costs while preserving ease of calculation through standardized formulas.
2Device complexity
If a fixed withdrawal percentage is used throughout the contract term, then the administrative complexity is reduced, but the lifetime benefit payments do not increase to offset inflation and medical costs in later years
Solution Approach 1:
The system uses dynamics to make the withdrawal percentage adaptive rather than static. By automatically adjusting the withdrawal percentage based on predefined factors (contract term and annuitant age), the system maintains low administrative complexity while ensuring that benefit payments increase over time to preserve purchasing power against inflation and rising medical costs.
Solution Approach 2:
The patent applies self-service by designing a system that automatically calculates and adjusts withdrawal percentages without requiring manual intervention. The automated calculation mechanism uses standardized formulas based on contract terms and annuitant age, allowing the system to self-regulate and maintain appropriate benefit levels throughout the contract term while preserving purchasing power.
3Ease of operation
If the withdrawal percentage remains constant, then the contract administration is simpler, but the monetary value of benefit payments decreases over time, reducing the annuitant's financial security
Solution Approach 1:
The patent resolves this contradiction by implementing a dynamic withdrawal percentage that automatically adjusts over the contract term and with annuitant age. This dynamic approach maintains relatively simple contract administration through standardized automated calculations while ensuring that benefit payments increase over time, thereby preserving monetary value security and protecting against the erosion of purchasing power.
Solution Approach 2:
The system applies parameter changes by modifying the withdrawal percentage based on predefined criteria (contract term progression and annuitant age). This approach allows the system to maintain administrative simplicity through formula-based adjustments while ensuring that benefit payments increase sufficiently to maintain monetary value security and protect the annuitant's financial interests throughout the contract term.
Data Source
AI summary
A computerized financial instrument management system has a data storage device storing data indicative of an account balance based on deposits, withdrawals and changes in value of investments selected by an owner, a payment base value, a guarantee of availability of benefit payments for a term, during time periods during the term, without reduction of the payment base value; and withdrawal factor values correlated with dates after a first of the benefit payments and increasing after the first of the benefit payments. A processor is configured to determine, for any of the time periods, an available amount of the benefit payment, based on data indicative of a withdrawal factor value and at least one of a payment base value and either the payment base value or the account value.