If investment rates go up , new money rates will go up to remain competitive. If investment rates go down, the annuity interest must also go down. There are no fees to open your new annuity contract and no administrative fees along the way. There is a modest early withdrawal fee, described in each product brochure as a Surrender Charge, and, depending upon your age, there is also a potential IRS penalty for premature withdrawals. While your annuity is compounding you may withdraw funds in accordance with contract provisions.
Most companies offer penalty free withdrawals on all non-qualified annuity products.
A surrender charge will be deducted from any withdrawals that exceed the penalty-free portion. The future tax will be ordinary income tax on the interest earnings. The tax advantage is that you pay it in the future, not each year as it is earned. This includes interest from non-qualified plans and any withdrawals from qualified contracts. Certain exceptions to this penalty do exist.