Life Annuity
A Life Annuity provides your clients with a guaranteed and predictable income for life.
Advantages of a life annuity
- Provides guaranteed regular lifetime payments
- Safe from market fluctuations
- Covers recurring expenses
- No management necessary
- Non-registered annuities are eligible for pension income tax credit and pension income tax splitting
Annuity options
- Reversibility: when the annuitant dies, the annuity payments continue and are paid to the contingent annuitant
- Guarantee: minimum period during which annuity payments will be made. For registered annuities, the guarantee cannot extend past the annuitant’s 91th birthday
- Indexation: to offset the effects of inflation, the annuity can be indexed at an annual percentage rate.
Factors that influence annuity payments
- Amount paid
- Date funds are received
- Date of first payment
- Options chosen
- Sex and date of birth of annuitant and spouse
- Interest rate in effect when the annuity is issued
Source of eligible funds
Minimum premium
Proof of age
- Required when application is submitted
- Must be 18 years or older
Annuity payment
- The annuity can be paid by direct deposit or cheque
- The annuity can be paid monthly, quarterly, semi-annually or annually
- Tax witholding permitted on request
- Annuities with payments of less than $300/year or $25/month are rejected.
End of annuity payments
- Upon the annuitant’s death*
* May vary depending on the options chosen (reversibility and guarantee)
Changes
Surrender
- The annuity may be surrendered at the commuted value
- The prescribed annuity is non-redeemable
Taxation
- Registered annuity: All of the payments received are taxable
- Non-registered annuity
- Prescribed: taxed at same rate each year
- Non-prescribed: tax rate decreases throughout the contract
