Annuities

What is an Annuity?
Unlike other income-producing investment options like bonds or GICs, an annuity can guarantee income for your client’s entire life, providing them peace of mind by knowing they will never out-live their savings.

Types of Annuities:

Life Annuity:
Income is guaranteed for the life of the client, or the client and spouse.
Ideal for clients who:
  • Are concerned about outliving their savings
  • Want to reduce ongoing investment decisions
  • Require a simple & secure source of income without the need to access their capital
  • Wish to minimize tax on investment income
  • Need diversifi cation in their investment portfolio
  • Want to support a charity in a tax effi cient manner
  • Prefer to transfer inheritances to their children gradually

Impaired Annuity: Guarantees a higher income for the client’s life, due to a shortened life expectancy because of a serious health condition.
Ideal for clients who:
  • Have suffered or are presently suffering from a life-threatening illness
  • Require a simple and secure income for life
  • Want to increase their current standard of living
  • Are concerned about funding ongoing medical treatment costs, personal care expenses or nursing home expenses
Term Certain: Guaranteed income for a specific time period.
Ideal for clients who:
  • Want to reduce ongoing investment decisions
  • Require a simple & secure source of income
  • Need an income for a specific period of time, such as a sabbatical
  • Want to convert savings into income to fund a child’s ongoing educational costs
  • Prefer to transfer inheritances to their children gradually

Annuity Options:
Prescribed:
The prescribed tax option offers tax deferral on non-registered annuities, by averaging out and deferring the taxable interest earned over the life of the annuity.

Indexed: Your client’s annuity can be indexed, which offers a fixed annual percentage increase to payments to help guard against inflation. Clients will receive lower income payments in early years in exchange for higher income payments in later years. Indexing is not permitted for prescribed annuities.

Deferred: Your client’s annuity income does not have to start immediately. You can lock in a guaranteed income amount at purchase that can start up to 15 years in the future (subject to some restrictions). In addition, clients can select a Return of Premium option to guarantee that beneficiaries will receive 100% of the amount invested if the annuitant dies before the payment start date.

Guarantees: Your clients can choose from one of several guarantee options to ensure a minimum amount is paid out of the annuity to them or to their designated beneficiaries in the event of their premature death. Options are Guaranteed Period, Cash Refund, Installment Refund.

The table below compares a GIC to an Annuity:

GICs

Annuity

Payment amount Typically Interest Only Contains both principal &
interest
Can payments fluctuate after purchase? Yes (If GIC rates are different
at renewal)
No
Do you have access to capital
after purchase?
Yes (Potential surrender
charges may apply)
No
Will initial payment amount
continue for life?
Not guaranteed Can be guaranteed
Non-registered taxation Income is fully taxable Income is partially taxable
(interest portion only)

Securing your Family's Future

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