A “variable annuity” is an annuity whose value and future income payments rise or fall with the performance of the investment options chosen, such as stocks, bonds and money market instruments, so the contract owner takes on the investment risk. Variable annuities are a US product. In Canada, the comparable insurance product is a segregated fund contract.
Held outside a registered plan such as an RRSP, a segregated fund contract’s income and capital gains are allocated to you and taxed each year; inside a registered plan, tax is deferred until funds are withdrawn.