An annuity is a financial product available in Canada that provides a fixed income stream to an individual or a couple for a predetermined period or for the rest of their lives. In Canada, annuities are becoming a very popular retirement income option that can help individuals ensure that they have a steady, guaranteed income stream during their retirement years.
If you are considering purchasing an annuity, you might be wondering how long the process will take from start to finish. In this blog post, we will explore the steps involved in setting up an annuity in Canada and provide an estimate of the time that it takes to complete each step.
Step 1: Determine Your Needs & Objectives
The first step in setting up an annuity is to determine your needs and objectives. You will need to assess your financial situation, your retirement goals and your risk tolerance. You should also consider you age, life expectancy and any health conditions that may affect your longevity.
Once you have a clear understanding of your needs and objectives, you can start exploring the different annuity options available in Canada. Speaking with an experienced annuity broker regarding your situation will also help determine if purchasing an annuity is right for you.
Time Estimate: Ideally between 1-2 weeks
Step 2: Shop Around For Annuity Options
Once you have a clear understanding of your financial situation, goals and objectives, the next step is to shop around and compare different annuity options. You can do this by contacting an annuity broker (we are brokers at Life Annuities.com) who specializes in annuities and has broker contracts with all the major life insurance companies in Canada who offer annuities.
During this step, you should compare the features of benefits of different annuity products, including their payout amounts, fees, guarantees, survivor benefits, beneficiary options and more. Be sure to ask lots of questions before purchasing to ensure that you are purchasing the right annuity product for your retirement income.
Time Estimate: Depends on when income is required to start and availability of funds. This should take at least a week or two.
Step 3: Choose an Annuity Provider
After researching and comparing different annuity options, you will need to choose a life insurance company to purchase the annuity from. In Canada, you can only purchase annuities from insurance companies because annuities are an insurance product.
More than likely you will want to move forward with the insurance company who has the highest payout available, but you should also consider the financial stability of the insurance company, as well as the quality of their customer service. You should also review the terms and conditions of the annuity carefully before making your final decision.
There is a company called Assuris in Canada which provides insurance protection on annuities in the event that the insurance company becomes insolvent. Annuity payments that are $2,000 per month and lower are provided with 100% insurance protection in the event that the insurance company becomes insolvent. Annuity payments that are $2,000 per month and higher are provided with 85% insurance protection in the event that the insurance company becomes insolvent.
An experience annuity broker should be able to easily explain your options and answer any questions that you have regarding the different insurance companies available to purchase an annuity from.
Time Estimate: This shouldn’t take longer than a couple of days once you have determined what type of annuity you are purchasing.
Step 4: Complete The Application Process
Once you have selected an insurance company to purchase an annuity from, you will need to complete and submit the application with a broker. At Life Annuities.com, we work with you to gather all of the information required to complete the application, gather identification documents, collect banking information and all other necessary documents. Once this has been done, we typically send the application documents via DocuSign. This allows you to review all of the documentation remotely and sign electronically. This is the quickest and easiest process to complete the application documents, but we can also provide physical documents as well. It really depends on what the client prefers and is most comfortable with.
Time Estimate: Completed within 1-2 days, depending on how long it takes the client to provide the information required for the application.
Step 5: Funding The Annuity
Funding an annuity depends on the source of the funds being used for the annuity.
Registered funds (RRSP, RRIF, LIRA, LIF, RPP, etc.) are typically transferred from the existing institution where the funds are held to the insurance company. The form used to complete this transfer is a Government of Canada form called a T2033 form (also referred to as a TARI form, Transfer Authorization of Registered Investments). This form allows your funds to transfer to the insurance company on a tax-sheltered basis. There are no tax implications when using this form.
The transfer of Registered funds can take anywhere from 1-6 weeks. It depends on the institution who holds the funds and how they process the funds. As the broker, we take care of this entire process and continue to follow up to ensure that everything is processed as quickly as possible.
Non-registered annuities can be funded in a couple of different ways. The client can mail a bank draft directly to the head office of the insurance company or the insurance company can pull the funds directly from the client’s bank account. Non-registered annuities do not take as long to fund as Registered annuities because there is no transfer process.
Once the funds have arrived at the insurance company, they will set up the annuity and provide the client with a final rate quote which outlines all of the details of the annuity including the purchase date, income start date, monthly or annual payment, guarantee period, etc.
Time Estimate: Funding an annuity can take anywhere from 1-6 weeks depending on the type of annuity and how the funds are being sent to the insurance company.
Step 6: Wait For The Annuity To Start
Once the annuity has been funded and set up, you will need to wait for the income payments to start. The length of time you will need to wait depends on the terms of the annuity contract. Some annuities start paying out immediately while others may have a deferred payout period of several years.
Time Estimate: Depends on the income start date of the annuity.
Conclusion
As you can see, it can take a bit of time to set up an annuity when you consider the date that you start researching annuities to the income start date. Make sure you take the time to understand your options and chat with an experienced broker to ensure that you are purchasing the right annuity for your situation.
Please reach out to us at Life Annuites.com to discuss your annuity options further. We can also run customized quotes from the top life insurance companies in Canada for you at no cost.