A type of annuity that combines the features of both variable annuities and indexed annuities. In other words, it is an indexed annuity that also provides potential for growth (or participation) based on the performance of a stock market index, such as the S&P 500. The buffer is represented in the protection for invested savings (to a certain extent), while providing a growth opportunity.

Clients’ premiums are usually deployed and invested in sophisticated structured products such as REIT index options and equity options, rather than in mutual funds as a first option. Structured products often have the potential of higher returns, but also carry additional inherent risks than the traditional investments.

A buffer annuity typically cap the amount of annual growth, and is still associated with loss potential if the underlying stock market indexes drop below the level of protection offered by the annuity.