How We Can Help:

SEGREGATED FUNDS

The sale of segregated funds (Seg Funds) in Canada is a huge area of growth. Segregated funds offer the benefits of participating in the returns of pools of funds like a mutual fund, but with extra guarantees to help mitigate your losses in down markets. Here are some ways we can make Seg Funds work for you! 

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• Maturity Guarantees – All Seg funds in Canada have a maturity guarantee attached to the contract. Often it is 75% of your deposits but can range up to 100%. 

  • With a maturity guarantee, an investor knows ahead of time that the worst they can do is have a percentage of their initial deposit after a given number of years.

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Example – If you had invested $100,000 in a seg fund in January 1999, In January 2009 when the stock markets bottomed out, and investments were down 45%, the insurance company would top up your account so that you were only down 25% - this is because of the 75% guarantee.  

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• Resets – All seg funds in Canada allow for client initiated resets. A reset locks in the current market value of the investment as the new initial deposit for use with a maturity guarantee, which also locks in your new 75% guarantee amount even higher than before. Having a reset allows the investor to permanently lock in gains in their market value for use with their maturity guarantee.

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• Time Frame - The time frame for resets per year and how often they can be invoked depends largely on the insurance company. However, this is an extremely beneficial aspect of a segregated funds investment. It allows you to strategically reset the guarantees when the market favours your investment. ​

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Example – Let’s assume in the situation as above; if you had invested that money in 1998 and received 10% growth that year and initiated a reset in January 1999. Your market value would have been $110,000. During the big market drop in January 2009 your account would be topped up to 75% of $110,000 instead of $100,000. 

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• Death Benefits – All seg funds investment contracts in Canada are actually considered an insurance policy. They are sold by an insurance company and as such can associate a death benefit with the investment. 

  • It does not work the same as a life insurance policy, where the death benefit greatly exceeds the premiums paid. It simply allows for a beneficiary to be named in the event of death of the investor. 

  • This is important because “The Last Will and Testament” of a person becomes public record at death. Named beneficiaries are never made public. 

  • In addition to keeping inheritance private, all funds that flow to a named    beneficiary by-pass probate. Thus reducing terminal taxes upon death and decreased waiting times for money.

• Investment Vehicles - Seg funds can be held in several different forms of investment vehicles such as; 

  • Registered plans: Registered Savings Plans (RSP), Registered Retirement Income Funds (RRIF) and Registered Pension Plans (RPP) are a few.

  • Nonregistered Plans: Tax free savings accounts (TFSA), Defined contribution pensions, and Locked In Retirement Accounts (LIRA) are a few. 

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GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) PLANS 

Whether you’re just beginning to think about retirement or you’re in the retirement phase of your life, there’s a lot to consider:

• What if you experience poor market returns early in retirement?

• Will you outlive your retirement income?

• Will your retirement income keep pace with inflation?

These are very real concerns for all investors. So how can we help?

By investing in a segregated fund sold by a Canadian insurer you can now add an additional level of safety to your investment. Opting for a GWMB option at any point in your investment life cycle can provide huge benefits when you decide to retire. 

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As noted, Seg Funds have inherent guarantees and benefits already associated with them. However, when you open a GMWB account you also receive:

• Guaranteed Bonuses – A simple interest bonus (usually 5%) is applied to your account every year that you do not make a withdrawal to go toward a guaranteed pension for you. 

• Automatic Resets –Every 3 years if the market value is up (not down) your bonuses and pension is recalculated based on current values. This helps drive up the value of your pension.  

• Guaranteed Pension

  • Established immediately is your worst case scenario pension. Upon application you know the absolute worst outcome when you go to retire. (*No, it is not Zero)

  • Upon retirement an average yearly pension amount is calculated based on the higher of your market value and guaranteed pension.

  • Once you start to draw on your pension the yearly payments are guaranteed never to decrease even when your market value reaches zero. 

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