C-Share Variable Annuity

Definition

A C-share variable annuity is a share class of variable annuity contract that carries no surrender charge schedule — providing the contract owner with full liquidity from contract issue — in exchange for a higher ongoing mortality and expense charge than the surrender-charge-bearing share classes (B-share, L-share, X-share) carry over their surrender periods.

Why it matters

The C-share structure is the variable annuity share class that resolves the liquidity-versus-cost tradeoff in favor of liquidity — eliminating the surrender period and surrender charge schedule entirely, in exchange for a permanently higher annual cost. Naming the structure explicitly is what makes the share-class tradeoff legible, because variable annuity contracts of nominally similar product type can carry very different liquidity and cost profiles depending on which share class is purchased.

How it works

A C-share variable annuity is structurally a variable annuity contract — premium invested in subaccounts with the contract owner bearing investment risk, separate account custody of the assets, optional living-benefit and death-benefit riders — with two specific structural distinctions from the B-share default. First, no surrender charge applies; the contract owner can withdraw any portion of the account value at any time without surrender penalty (subject to potential tax consequences under the IRS rules applicable to all non-qualified annuities). Second, the mortality and expense charge is set at a higher annual rate than a comparable B-share contract would carry — typically 25 to 75 basis points higher, depending on the specific carrier and contract design — and this elevated charge applies for the life of the contract rather than reducing or eliminating at the end of a surrender period as the B-share's economics effectively do. The C-share structure is most commonly offered in fee-based and registered investment advisor distribution channels, where the absence of a surrender charge aligns with the advisory-fee compensation model.

In practice

For an individual considering a variable annuity, the C-share-versus-B-share decision is a tradeoff between liquidity and ongoing cost — the C-share offers full access to the account value from contract issue but pays a higher annual M&E charge over the contract's life; the B-share offers lower ongoing cost but constrains access to the account value during the surrender period. The C-share economics typically favor the contract owner who anticipates needing access to the account value within the typical seven-to-ten-year surrender period of a B-share, or who anticipates evaluating alternative arrangements (a 1035 exchange, a withdrawal in full) at some point during that period. The B-share economics typically favor the contract owner who anticipates holding the contract through the surrender period without needing access. A professional advising on share-class selection should be able to project the total cost differential across plausible holding periods and to surface the liquidity-cost tradeoff as the operative decision.

In the Longevity Standard Framework

The C-share variable annuity differs from the B-share default specifically on the liquidity property — full versus conditional during the surrender period — and on the magnitude of the cost-structure value, with the elevated M&E charge representing a higher embedded-spread cost over the contract's life. Embedded spread is one of five values that the cost-structure claim property can take, alongside none, explicit fee, crediting parameter drag, and guarantee charge — operating in the variable annuity context through the M&E charge assessed against the subaccount yield. The liquidity value of full is the structural departure from the B-share's conditional liquidity during the surrender period, and is the share-class feature most directly responsible for the elevated cost. When a living-benefit rider is attached to a C-share variable annuity, the rider's claim profile applies as it would on any variable annuity, with the cost-structure value becoming guarantee charge layered on top of the C-share's elevated M&E charge — total cost in this configuration is typically the highest among variable annuity share-class combinations.

Related terms

• Variable annuity
• Mortality and expense charge (M&E)
• Surrender charge
• Surrender period
• Subaccount
• Separate account
• Liquidity
• 1035 exchange