A variable annuity is a contract between you and an insurance company through which you invest a specified amount of money. Your investment ultimately gives you a regular income at a specific point in the future, often at retirement. The annuity is variable because this income will depend on how well the insurance company's investments perform. You can buy annuities in various share classes such as B, C and L -- the class you choose influences the fees you pay.
Class B Shares
Class B share annuities usually do not have an upfront sales charge. You may have to factor in a contingent-deferred sales charge, or surrender charge. This applies if you take money from the annuity early as outlined in your contract. Typically, the surrender charge decreases each year until the end of the surrender period when it no longer applies.
Class C Shares
Class C share annuities do not have either an upfront sales charge or a surrender charge. This makes them a good choice if you need a liquid investment, as you can take out your money at any time. However, you'll also usually have to pay higher maintenance fees to compensate for the lack of other charges.
Class L Shares
Class L share annuities also have a surrender charge if you take money from the annuity within the surrender period. However, the surrender period for L share annuities is much shorter than for B share annuities. This means that they typically charge higher maintenance fees than B share annuities.