Annuity Glossary

Glossary of Key Annuity Terms

Annuitant

The person on whose life expectancy the policy is based. The annuitant is typically the owner of the policy.

Annuity

An annuity converts a fixed sum of money into a series of periodic payments that provide a regular source of income, usually during retirement.

Annuity Due

An annuity when the deposit date and the payment date are the same.

Annuity Rates

The interest rate in effect at the time you buy your annuity. It determines how much you earn on your investment. Basically, the higher the rate, the more interest you receive.

Annuity Types

Single life, joint & survivor life and term certain

Beneficiary

The person designated to receive the death benefit payable on death of the annuitant, where applicable. If you have chosen a guarantee period and both annuitants die after income payments start and before the end of the guarantee period, death benefit payments will be made to your named beneficiaries

Date of Issue

The contract becomes effective on the date the insurance company receive the sum of all amounts that equal the total premium

Death Benefit Before Annuity Commencement Date

Policyholder's premium, plus accumulated interest is paid to his/her benefciary. For joint life annuities, in the event of the death of only one of the annuitants, the annuity is converted to a Single Life Annuity.

Deferred Annuity

An annuity where the income payments begin at a specific date in the future. The advantage is the owner is able to lock-in interest rates today, even though the income is not needed until some time in the future.

Frequency of Income

Monthly, quarterly, semi-annual or annual.

Guarantee Period

Life annuities are guaranteed for the life of the annuitant or co annuitant; you can not outlive the annuity payments. And an extra feature of a guarantee period, means you can ensure that someone gets a benefit if you die early.

• For non-registered funds

A named beneficiary has the choice of continuing the guaranteed payments or receiving a lump sum payment. The can only receive the present value of the remaining guaranteed annuity payments.

• For registered funds

A spouse can receive the balance of the guarantee payments, or receive the present value of the remaining guarantee payments as a lump sum. Otherwise a beneficiary receives the commuted value.

Impaired Annuity

Impaired annuities are specially designed for those suffering from serious health problems. This type of annuity will provide higher income payments than a standard annuity provided the annuitant qualifies for an age rating.

Increasing Income

Income payments increase each year by a fixed percentage. Maximum increase per year : 4% for registered annuities and 6% for non-registered annuities.

Income Payments

Income payments are payments due to the payee while at least one of the annuitants is living.

Income Tax

The portion of each income payment, which must be declared as taxable income, generally depends on whether this contract is a prescribed annuity or a nonprescribed annuity.

Indexed Annuity

Indexed annuities help to combat the effects of inflation by providing automatic income increase on an annual basis. These increases are made according to a predetermined percentage. You can choose from an amount up to 4%.

Insured Annuity

An insured annuity is a strategy that provides an attractive alternative to today's low, fixed-income investments. It provides a tax-efficient, lifetime income and preserves or increases the original capital for the estate. A specially designed, prescribed annuity provides the income and a life insurance policy preserves the capital, providing a tax-free payout when the individual dies.

Joint Life Annuity

In order to offer maximum security, Joint Life Annuities provide income payments for the lifetime of a primary annuitant and that of a second annuitant (usually a spouse). Income payments may continue to the survivor in the same amount, or in a predetermined reduced amount.

Level Income

Income payments are the same for the duration of the annuity.

Life Annuity

As it’s name implies, a Life Annuity provides income payments during the life of the annuitant.

Non-prescribed

taxable portion changes each year.

On Death Of

This will determine when the joint income will be reduced.

• 1st death
• Primary annuitant
• Secondary annuitant

Payee

The payee is the person entitled to receive any income payments falling due under this contract while at least one of the annuitants is living. You may appoint a payee or change the appointment at any time while at least one of the annuitants is living, subject to any limitations provided by law.

Payment Frequency

• Monthly
• Quarterly
• Semi-annually
• Annually

Pension Jurisdiction

The pension jurisdiction under which the locked-in monies are governed. This field is required for locked-in funds (RPP, Locked-in RRSP, LIRA, RLSP, LIF, LRIF, PRIF or RLIF plans). Generally locked-in pension money is governed by the jurisdiction where the monies were earned, which is not necessarily the jurisdiction in which the client currently lives.

Prescribed

Level taxable portion each year. This taxation basis is attractive to taxpayers as it allows for the deferral of taxes. It is regulated and can only be used with specific types of annuities. All other annuities must be on a non-prescribed taxation basis.

Purchase Date

The purchase date is the date the insurance company receive the first premium.

Rate Basis Guarantee (RBG)

In most cases a 45 day rate basis guarantee to lock-in current interest rates.

Rate Effective Date

The current date of the rates the insurance company uses in calculating annuity income.

Reduce Income

Select whether or not the income payment should be reduced when one annuitant dies (for Joint and Survivor Life annuities only).

If “Yes”, you choose between the “On Death Of Primary Annuitant”, "On Death of Secondary Annuitant" or "On Death of Either Annuitant" and “Reduce by "%” field.

Reduced By %

Enter the percentage by which the income will be reduced when the selected annuitant dies. This number must be a whole number between 0 and 100. Generally, for locked-in monies, income cannot reduce by more than 40% unless the spouse signs a spousal waiver.

Single or Joint Life Annuity with a Guaranteed Period

Like standard Life Annuities, these products provide income payments for the life of the annuitant. In addition, however, these annuities will guarantee that a certain number of income payments will be made, whether the annuitant lives or not.

Single Life Annuity

Provides annuity payments for as long as the policyholder lives.

Sources of funds

Funds that can be used to purchase an annuity.

For registered annuities:

• Registered Retirement Savings Plan (RRSP)
• Locked-in RSP (LRSP)
• Locked-in Retirement Account (LIRA)
• Registered Pension Plan (RPP)
• Deferred Profit Sharing Plan (DPSP)
• Registered Retirement Income Fund (RRIF)
• Life Income Fund (LIF)
• Locked-in Retirement Income Fund (LRIF)
• Prescribed Retirement Income Fund (PRIF)

For non-registered annuities:

A non-registered annuity can be on a “prescribed” or “non-prescribed” taxation basis. Because a prescribed annuity allows for the deferral of tax, taxation legislation has placed more restrictions on the terms and provisions of the policy. Speak to your advisor for more details.

Taxation

Registered Annuities the annuity payment is fully taxable. Non-registered Annuities only the interest portion is taxable. The taxable portion can be reported on a prescribed or non-prescribed basis.

• Prescribed: level taxable portion each year. This taxation basis is attractive to taxpayers as it allows for the deferral of taxes. It is regulated and can only be used with specific types of annuities. All other annuities must be on a non-prescribed taxation basis.
• Non-prescribed: taxable portion changes each year.

Term Certain Annuity

Also known as Fixed Term Annuities, these products provide income payments only for a specific number of years. These payments are not contingent upon survival.

Temporary Annuity (non-registered policies only) Provides annuity payments for a specified period as long as the policyholder is alive.

Total Premium

The total premium specified is the sum of all the amounts the insurance company received under the contract.

Unisex Portion ($)

The portion of the total premium amount that is designated unisex by specific provincial or federal pension legislation (for RPP, Locked-in RRSP, LIRA, LRSP, LIF, LRIF, PRIF or RLIF plans only).

To determine the exact unisex portion of a plan, review the pension statement, contact pension plan administrator, or contact the financial institution where the monies are currently held.

U.S. Dollar Feature

Payments can be converted to U.S. dollars and deposited in the policyholder's bank account in the U.S. Snowbirds have the ability to receive their payments in their bank account in Canada in Canadian dollars or the U.S. in American dollars.