MVA (Market Value Adjustment)
A Market Value Adjustment (MVA) is an additional charge or credit applied to a surrender that exceeds the free withdrawal amount, calculated based on the change in interest rates since the contract was issued. If rates have risen since issue, an MVA charge reduces the withdrawal amount (the carrier is making the consumer whole for the loss the carrier would take on the supporting bond portfolio). If rates have fallen, the MVA credit increases the withdrawal amount. MVAs apply only to surrenders, not to scheduled payments after annuitization, and only to amounts above the free withdrawal.
A 5-year MYGA paying 5.0% is purchased when 5-year Treasuries yield 4.0%. In year two, 5-year Treasuries have risen to 6.0%. The consumer surrenders the contract. The surrender charge applies to the excess withdrawal, and the MVA adds an additional charge based on the 200 basis-point rate increase — typically 3-7% of the excess amount, depending on the MVA formula and remaining term. The combined surrender charge + MVA can exceed 10% of the surrender amount in adverse rate environments.
Why it matters
The MVA is a structural feature of most MYGAs and many FIAs. It is not a punitive add-on but a mechanism that allows the carrier to offer a higher locked rate by sharing interest-rate risk with the consumer at surrender. Consumers who hold to term face no MVA. Consumers who surrender early in a rising-rate environment can face significant MVA charges.
How to evaluate
Read the MVA formula in the contract or rate brochure. The formula is mathematical and depends on a reference rate (typically a Treasury or carrier-published index) and the remaining contract term. A contract without an MVA generally pays a lower base rate than a contract with an MVA — the difference is the carrier compensating the consumer for not sharing the rate risk.
In the contract
Look for "market value adjustment," "MVA," and the formula in the contract appendix or rate brochure. The MVA typically applies only to the portion of a surrender that exceeds the free withdrawal amount.
Related terms
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