Payout Rates and Returns on Income Annuities
The pricing of an income annuity is typically described using either the monthly income amount it generates, or as the annual payout rate of the income received as a percentage of the premium amount. For example, an annuity might offer $416.67 per month on a $100,000 premium. For 12 months, that sums to $5,000, which is 5% of the initial premium amount. In this case, the annuity payout rate is 5%. I generally describe annuity pricing by annual payout rate.
Pfau, Wade, "Payout Rates and Returns on Income Annuities" (2015). Faculty Publications. 246.