Annuities

Annuities guarantee you a regular income for a set period of time or until your death.

Both RRSP and non-RRSP savings may be used, in whole or in part, to buy an annuity.

You must convert your RRSP into an annuity no later than December 31 of the year you turn 71.

Features

• Regular income for a set period of time.
• Fixed interest rate for the duration of the annuity.
• Interest rate established at the time annuity is taken out.
• Payments can be indexed annually.
• Two types of annuities available: the life annuity and the annuity certain
• Annuity can be combined with a LIRA or LIF. The RRIF or LIF portion ensures investment income flexibility; the annuity portion ensures retirement income stability.

Advantages

• Income stability: exact annuity amount is set at time of purchase.
• Income is protected from potential interest rate reductions.
• No need to manage investments.
• Protection against inflation.
• Taxes are spread out over several years.

How annuity payments are calculated

The annuity amount is based on:

• The amount of capital used to purchase the annuity: the higher the amount, the higher the payments.
• The going interest rate at the time of purchase; the higher the interest rate, the higher your payments.
• Your age at the time of purchase; the older you are, the higher your payments.
• The guaranteed number of years you will be receiving payments.

Life annuity

A contract in which a life insurance company agrees to pay you a lifetime, periodic payment (annuity) in exchange for your RRSP, locked-in RRSP, LIRA, RRIF, LIF or non-registered savings.

• Provides you with predetermined payments for your lifetime and, in some cases, your spouse's lifetime.
• Payments may be guaranteed for a certain period of time (5 to 25 years): in the event of death during this period, your spouse continues to receive the annuity until the end of the guaranteed period. If there is no surviving spouse, the designated beneficiary or beneficiaries receive an amount equal to the present value of the payments for the remaining period.
• Contract may include a survivor clause where, upon annuitant's death, payments are made, in whole or in part, to the spouse for his or her lifetime.

Annuity certain (Term-certain annuity)

A contract in which a life insurance company agrees to pay you a set periodic payment (annuity) in exchange for your RRSP or RRIF savings until age 90.

• Guarantees you regular payments until the end of the specified period or until age 90.
• If the annuity was purchased with your RRSP, it is automatically guaranteed up to age 90.
• If death occurs before the end of the guaranteed payment period, payments are made to your spouse until the end of this period. If there is no surviving spouse, your estate receives an amount equal to the present value of payments for the remaining period.

To find out more about annuities, visit the Desjardins Financial Security Website.

RRIF-Annuity or LIF-Annuity combination

An attractive option for some people.

• The RRIF or LIF portion ensures investment income flexibility.
• The annuity portion ensures retirement income stability.

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