The percentage of an index’s gain that investors receive is called the participation rate. The participation rate of an indexed annuity can be anywhere from 50% to 90% or more. A participation rate of 80%, for example, and a 10% gain by the index would result in an 8% gain by the investor. Some indexed annuities have a cap rate. Renowned Economist Roger Ibbotson Unveils New Research Indicating Fixed Indexed Annuities May Outperform Bonds Over the Next Decade Research cautions overreliance on bonds may result in critical Unlike regular annuities, which give a fixed payout, returns on indexed annuities rise and fall with the stock market. But these annuities don’t invest in stocks. Instead, that money is invested in bonds and stock options, and your returns are based on a formula linked to an index, says Sheryl Moore, president and CEO of Wink, a life insurance and annuity research firm in Des Moines.