What You Need To Know About An

ALDA or Advanced Life Deferred Annuity

ALDAs were first introduced in the 2019 Canadian federal budget. The Government of Canada amended the tax rules on January 1st 2020 to allow Canadians to purchase a Life Deferred Annuity (ALDA) using certain registered savings plans. As of December 2023, Desjardins Financial became the first life insurance company in Canada to offer ALDA's.

What is an ALDA?

Advanced Life Deferred Annuity or ALDA for short is a new type retirement product only available in Canada. A retirement product that provides a guaranteed lifetime income that will help you from running out of money in retirement, no matter how long the annuitant lives. An ALDA is similar to a life annuity, however the annuity income payments must start before the end of the year in which the annuitant turns 85 years of age.

Purpose of an ALDA?

An ALDA is designed to help seniors with mananging their retirement savings to provide income payments later in life.

• An ALDA is an annuity policy that is issued by Canadian life insurance companies that provide annuity products.
• An ALDA like a life annuity is payable for as long as the annuitant is alive or for a joint life annuity, as long as both annuitants (spouse or common-law partner) are alive.

Desjardins First To Offer ALDA

Desjardins is the first Canadian life insurance company to offer advanced life deferred annuities (ALDA's) in Canada.

ALDA Key Features

• Deferred Income Start: An ALDA allows the annuitant to invest part of their retirement funds with the understanding that they can start receiving income payments at a future date.
• Lifetime Income: Once income payments start, they continue for the rest of the annuitant's life-time.
• Investment Limits: The Canadian government has set limits on how much can be invested in an ALDA. As of my last update in April 2023, the limit is the lesser of 25% of the value of the retirement saving.
• Eligibility: ALDAs can be purchased using funds from registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), defined contribution pension plans (DCPPs), and pooled registered pension plans (PRPPs).
• Tax Treatment: The funds used to purchase an ALDA are tax-deferred until they start being withdrawn, at which point the income becomes taxable.
• T2157 Direct Transfer Form: Direct Transfer from a Registered Plan to purchase an ALDA Annuity.

Purchasing an ALDA

* To purchase an ALDA (Advanced Life Deferred Annuity) you must transfer your funds from one of the following Canadian registered plans:

1. Registered Retirement Savings Plan (RRSP)
2. Registered Retirement Income Fund (RRIF)
3. Deferred Profit Sharing Plan (DPSP)
4. Pooled Registered Pension Plan (PRPP)
5. Money Purchase Registered Pension Plan (MP RPP)

*Source - Government of Canada

ALDA Illustration Examples

Desjardins Illustration of a Single-Life ALDA

Desjardins Illustration of a Joint-Life ALDA

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