A SPDA (Single Premium Deferred Annuity is a form of annuity investment where a single lump sum of money is deposited to fund an annuity contract. This differs from the standard periodic Deferred Variable Annuity which is funded through a series of scheduled payments.

An annuity is an agreement to pay the annuity contract's beneficiary money from the contract on a certain date either in installments, or as a lump sum, dependent upon the distribution option selected. Only insurance companies issue annuities and as there are life guarantees, all annuities, fixed interest or variable, have mortality and expense fees.

Dependent upon the type of annuity, earnings that are credited during the accumulation period may be a combination of interest, dividends and capital gains, or may be interest only. The earnings accumulate tax deferred as they are not taxed until withdrawn by the annuity holder.

There are two types of annuities:

1. Fixed - which pays a fixed rate of interest over a set period of time. The rate of interest on a fixed annuity is called the "declared rate" and can change periodically, however there is always a guaranteed minimum rate of interest. Guarantees are subject to the claims paying ability of the underlying insurance company.

2. Variable Annuities - are so named due to the nature of the underlying investments. The policyholder chooses from a selection of different investment options that perform similarly to mutual funds. The options are typically bond, money market and stock funds and the value of these "subaccounts" change based upon market performance. The investment options may be managed either by the insurance company or by outside fund managers. There is no guaranteed return on the variable funds as the value of these funds are subject to market risk.