How it works
Pacific Life Index Foundation Fixed Indexed Annuity: product description and policy
The Pacific Life Index Foundation Fixed Indexed Annuity offers the annuitant (annuity investor) an opportunity to earn a portion of market index-linked return without incurring the risk of market downside. It is a suitable plan for people who aim to grow and protect their retirement savings, with good index and cap options. This plan is also suitable for people seeking guaranteed lifetime income while protecting and growing their retirement savings.
Let’s look at the high-level fine print of the Pacific Life Index Foundation Fixed Indexed Annuity, and then we will discuss each point in detail.
The Pacific Life Index Foundation Annuity is almost identical for all policy tenures, except for the crediting period, surrender charge schedule, and indexing rates. For ease of discussion and better clarity, we will discuss the Pacific Life Index Foundation 5 (unless mentioned otherwise) FIA for the rest of the article.
How does the Pacific Life Index Foundation Fixed Indexed Annuity work?
An annuitant (maximum age at the time of policy issue: 85) can purchase the Pacific Life Index Foundation Annuity with a minimum initial purchase amount of $25,000. In return, they will earn a portion of market index returns (calculated using a formula we will discuss shortly), credited over the chosen crediting period. Apart from the regular crediting period, various events may trigger earnings credit: free withdrawals, a long-term care/terminal illness/injury event, or a death benefit payable.
For current rates, see Current Rates ↑.
The Pacific Life Index Foundation Annuity allows the annuitant to choose crediting strategies tied to the S&P 500 and the MSCI EAFE Index to determine their earnings credit. Each of these two indexes has different strategies and a fixed-rate guaranteed interest strategy to choose from (making a total of 5 strategy options). We will discuss each available index briefly:
1. S&P 500 Index
The S&P 500 index is one of the most popular and oldest indexes in the world. It tracks 500 large-cap publicly traded stocks listed in the United States, serving as a barometer for the overall U.S. equity market. It is a reliable index and has often succeeded in the test of time. 2. MSCI EAFE IndexThe MSCI EAFE Index is designed to represent the performance of large- and mid-cap securities across 21 developed markets, including Europe, Australasia, and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions and market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries.
Note: In addition to allocating the funds in the following indexes, the annuitant also has the option to allocate funds at a fixed interest rate. These Fixed Rates tend to change from time to time. You can view the latest fixed rates of this annuity.
Rates and costs
Rates, bonus, surrender charges, and costs
The Earnings Crediting Formula
The earnings crediting formula is the most important part of this annuity discussion. It is important to know that we don’t simply get the index return credited to our annuity. There are a few rate-limiting mechanisms (in the form of cap rates, trigger rates, etc) that the company has in place that affect our earnings. These rates tend to change over time, and the updated rates can always be checked on the company’s website or with your trusted financial advisor. You can view the latest indexing rates of this annuity here.
The Pacific Life Index Foundation Annuity uses four index crediting strategies and one fixed rate strategy.
| S&P 500 Index | MSCI EAFE Index |
|---|---|
| Point-to-Point Option with Cap | Point-to-Point Option with Cap |
| Performance-Triggered Index Option with Declared Rate | Performance-Triggered Index Option with Declared Rate |
Let’s explore the Pacific Life Index Foundation Annuity rate chart to gain a better understanding of earnings crediting strategies. Please note that these rates were last updated in March 2026 and may change over time. For the most current Pacific Life Index Foundation Annuity rates, contact your trusted financial advisor.
The table above shows that the annuitant can choose from two underlying indexes - the S&P 500 Index and the MSCI EAFE Index, offering a total of 5 crediting options (4 index-based and 1 fixed). These indexes offer multiple interest crediting options, such as performance-triggered and cap rates. Additionally, there is an option to allocate funds to a fixed account with a declared interest rate. As an annuitant, you can allocate your premium to one or more of these crediting strategies.
Let’s now explore how each of these crediting strategies works.
Point to point with Cap
Cap rate is the most important terminology in an FIA. It means the rate at which your interest-earning capacity is capped. For example, if an index returned 13% but your contract’s cap rate is 7%. In this situation, you will be eligible for an interest credit of only 7%. It doesn’t matter how much the index goes above the cap rate; the maximum interest you can earn is the cap rate.
Performance Trigger Rate
A flat or positive index return triggers the declared interest rate to be credited to the contract value. If the index return is negative, no interest is credited, but there will be no loss, and the contract value will remain the same. The declared interest rate is set at contract issue and applies for the 1-year indexed term.
Performance Trigger Rate simulator
Shows how a flat or positive index year can credit the declared trigger rate.
6%
Trigger activates
Formula
10% is flat or positive, so the trigger credits 6%
This is a one-year teaching example only. Actual contract credits depend on the index, strategy term, allocation, renewal rates, state rules, and carrier contract language.
Fixed Account Option
If you opt for a fixed account option, you simply earn the fixed rate for a particular period specified by the company before your policy begins. These rates are usually low compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario.
I believe that, at this time, the 1-Year S&P 500 Performance Triggered strategy, the MSCI EAFE point-to-point with cap, and the S&P 500 point-to-point with cap offer the most compelling value. These strategies provide a strong balance of growth potential and downside protection.
Accessing your Money
Should your needs change unexpectedly, and you need to take an excess withdrawal (a withdrawal above the free withdrawal amount available in a given contract year), you may be entitled to access additional monies. However, certain charges and penalties may apply. Any amount withdrawn over the remaining free withdrawal amount is subject to a Surrender Charge. Below is the Surrender Charge schedule for the Pacific Life Index Foundation Annuity.
In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period.
This surrender charge schedule is only valid for select states (California usually has a different rate structure) for the Pacific Life Index Foundation Annuity product. For complete details about each state, you may contact your trusted financial advisor. Once the surrender charge period ends, you can typically access your full account value without fees. However, any withdrawal reduces both your account value and, if applicable, the income base tied to optional riders, which may impact future guaranteed income.
An annuitant can also convert the contract into a stream of guaranteed income, known as annuitization. They can choose from various payout options designed to meet different needs.
- Life Only – Provides income for as long as you live.
- Joint and Survivor Life – Continues payments over two lifetimes, often used by couples.
- Life with Period Certain (up to 30 years) – Pays income for life, but guarantees payments for a minimum period even if death occurs earlier.
- Period Certain (up to 30 years) – Provides guaranteed payments for a set number of years, regardless of lifespan.
- Single Life or Joint Life with Cash Refund – Ensures that if the annuitant(s) pass away before receiving payments equal to the original premium, the difference is refunded to beneficiaries.
- Single Life or Joint Life with Installment Refund – Similar to the cash refund, but any remaining balance is paid out over time in installments.
These options allow flexibility in balancing lifetime income needs with legacy goals, offering a way to customize how and when funds are accessed in retirement.
Riders and waivers
Riders and waivers
In an insurance policy, riders are an additional provision that can be added to enhance the benefits of the base policy. The Pacific Life Index Foundation Annuity offers two optional paid riders that allow policyholders to enhance the base contract’s benefits. The first is an optional death benefit rider, designed to help protect and potentially increase the legacy passed on to beneficiaries. The second is an enhanced lifetime income rider, which provides a guaranteed stream of income payments that the annuitant cannot outlive, thereby strengthening long-term retirement income security.
Interest Enhanced Death Benefit
For current rates, see Current Riders ↑.
Your beneficiaries will receive the greater of your Interest Enhanced Death Benefit Base or the standard death benefit amount upon your death. This optional benefit is subject to state and broker/dealer availability and variations. Please refer to the Interest Enhanced Death Benefits brochure for more information and work with your financial professional to determine if this optional benefit is appropriate for your financial needs.
Enhanced Lifetime Income Benefit 3
The Enhanced Lifetime Income Benefit 3 is an optional guaranteed minimum withdrawal benefit. Before reaching the maximum annuity date, this benefit serves as an alternative to annuitization, allowing for guaranteed lifetime withdrawals starting at or after age 59½. Note that this credit is not added to your contract value and does not represent a rate of return.
Confinement must begin after the contract issue date, and written proof is required from both the qualified care facility and the recommending physician.
Diagnosis must occur after the contract is issued, and written proof with supporting documentation is required from a qualified physician.
Contract/Administrative Charge
The Pacific Life Index Foundation Annuity levies no annual contract or administrative fees.
Carrier
Company details
You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.
Pacific Life Insurance Company
Pacific Life Insurance Company has been in business since 1868. It has been one of the largest providers of annuities in the US for many years and has consistently ranked among the top ten in Fixed Indexed Annuity Sales.
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
| AM Best | A+ (2nd of 13 ratings) |
| S&P | AA- (4th of 21 ratings) |
| Fitch | AA- (4th of 19 ratings) |
| Moody's | Aa3 (4th of 21 ratings) |
Pacific Life Insurance Company has maintained decent ratings for many years. It is considered financially strong and stable. As of year-end 2024, some of the financial highlights for Pacific Life include its:
- $16.01 billion in operating revenues
- $15.99 billion of total stockholders’ equity
- $1.47 billion in adjusted operating income
- $238.90 billion in total assets
Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Pacific Life Insurance Company.
Pros
The plan offers well-known indexes with established histories
Free Enhanced Withdrawal Benefit
This no-fee rider is automatically included for owners under age 65 and includes both a Qualified Nursing Care and Terminal Illness Benefit.
Multiple Payout Options
Life Only, Life with Period Certain, Joint and Survivor Life, Period Certain, Single Life or Joint Life with Cash Refund, and Single Life or Joint Life with Installment Refund.
Confirm before buying
Less Number of Indexing Options
High Initial Payment
$25k vs. $10k on other popular plans
Conclusion
Conclusion
With the advancements in healthcare and technology, the average American today lives longer than ever. So, it’s very important to have a stream of income that can grow safely and steadily and that has the ability to provide a fixed, guaranteed income during retirement years. This helps you mitigate the risk of outliving your income and ensures that you continue to live a decent life even in your retirement.
The Pacific Life Index Foundation Annuity helps you grow your retirement savings with much less risk. Through its indexed annuity, it offers principal protection and the opportunity to participate in the market index without any downside risk. If you are considering buying a Fixed Indexed Annuity that works on the growth front, the Pacific Life Index Foundation Annuity might be an ideal product to look at. However, you must keep in mind that this is a growth annuity and may not be the best suited for people who are super-conservative or at later stages of retirement.