A Guide To Canadian Segregated Funds

John Beaton

Tel:  (604) 535-2404
Toll Free: 1-800-667-8818

This website is about segregated funds and their extraordinary guarantees. Segregated funds are a Canadian insurance product and are only offered to Canadians residing in Canada.

Segregated funds are a long term investment. By themselves, they can be purchased from many insurance companies with either [a] 75% death guarantee/75% maturity guarantee, [b] 100% death guarantee/75% maturity guarantee or [c] 100% death guarantee/100% maturity guarantee. The maturity guarantee is based on at least 15 years from start of investment or last reset. The better the guarantee, the higher the fees. There is also the benefit of being able to reset investments at one or more times annually when there are gains. The fees for having these guarantees against investment loss are not unreasonable but they are higher than the fees for mutual funds which don't have any guarantees against loss.

Today, one of the most common ways to invest in segregated funds is in a bundled product called a Guaranteed Lifetime Minimum Withdrawal Benefit [GLMWB]. This form of offering segregated funds can be found at several of the major Canadian Life Insurance companies. The investor can choose from among a large selection of segregated funds such as bond funds, income funds, dividend funds, equity funds, etc. within a range that the investor finds the risk comfortable. Combined together inside a GLMWB, this choice of segregated funds is open to market conditions. Also, depending upon the insurance company providing the GLMWB, there may be a full notional bonus in the first year that the investment begins or a partial bonus depending on what time of the year the investment was started. Virtually all of the insurance companies provide a reset of the client's investment on the day of the third anniversary, provided there has been a positive gain recorded. This reset takes place on the anniversary date every third year thereafter, only if there has been a gain. Subsequent notional bonuses are calculated on the reset value.

Generally, the following is common to all Guaranteed Lifetime Minimum Withdrawal Benefits.

• Removes the risk from investing in the market.
• Market losses do not affect the guarantee of lifetime income.
• Target market is middle age to near retirement years.
• RRSPs, RRIFs and non-registered investments are available.
• Annual Notional Bonus 5% each calendar year while no withdrawals are made.
• Re-set of gains every 3rd year.
• Lifetime level withdrawals of 5% per year usually start at or near retirement age.

Please note that more detailed descriptions of Guaranteed Lifetime Minimum Withdrawal Benefits using segreaged funds, including investment objectives, and investment risks may be found in the Information Folder and accompanying Summary Fact Statements which may be obtained from John Beaton by contacting him through e-mail or telephone shown below.

Subject to the applicable death and maturity guarantees, any part of the premium or other amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value according to fluctuations in the market value of the assets in the segregated fund.

Segregated Funds are only available to Canadian residents. Persons resident or located in other countries are not eligible to purchase these products or associated services. Within Canada, the information on this web site is not intended to be construed as an offer to sell any insurance products in the province of Quebec.

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