Module 9 Flashcards
What is an Annuity? A Pay out Annuity?
Accumulation accounts designed to provide a stream of payments.
Payout: form of deposit investment providing a stipulated sum of money payable at regular intervals. Throughout a lifetime/Specified period, etc.
either in segs or GDAs.
At the end of accumulation phase, stream of payments or lump sum.
How are deferred annuities taxed?
All growth is taxable in year of earnings. One withdrawal a year without penalty.
Non-registered deferred annuities are reported annually for growth. FMV-ACB*50%
What are the penalties for withdrawals on Deferred Annuity contracts?
Early Withdrawal on Segs: Back end load charge, declining percentage.
GDAs: Market value adjustments: Interest rate adjusted from old to new term, credit rate adjustment to reflect withdrawal rate, extra penalty.
What is the difference between Annuity and Life Insurance?
Annuities protect against living too long, Life insurance against dying too soon.
What are the different types of annuities?
Duration: Term - periodic income over a fixed period. Not based on age or sex. Life - Pays for life, based of age, sex, health, smoking.
Payout schedule: Immediate/Deferred
Income tax treatment
What are the different type of life annuities?
Straight life - paid until death of annuitant.
With Guarantee: Until death and then guaranteed period after.
Cash refund: Monthly payments until death, then lump sum of remaining value.
Installment Refund: Payments until death, Payments after death of residual.
What is the difference between commutable and non-commutable?
Commutable : can be paid in lump sum. Amount: PV of all future payments adjusted at discount rate to allow for TVM.
Non-Com: Can’t make lump sum payout at anytime
What are the two types of income tax treatment for annuities?
Prescribed: Income is reported level over life of annuity. Less early, more later.
Accrued: Reported to annuitant, higher in early years, lower in later.
BLEND OF TAX FREE CAPITAL AND TAXABLE INTEREST
What are the requirements for prescribed annuity?
Non-Registered, Have commenced payments, Level payments, owned by annuitant, Term certain, No option past 90
What are the advantages Fixed vs. Variable?
Fixed: rate set, payout set, no protection from inflation.
Variable: Inflation protected.
What does Assuris protect against?
Death benefits up to 200k CSV, Seg Guar up to 60k Health benefits up to 60k Monthly incomes 2k Accumulated Values (GDAs, RRSPs,) up to 100k
