Prescribed Annuities
Income for Life
Pay Less Tax

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Prescribed annuities are more popular than ever. They are making a big comeback due to poor after-tax returns on guaranteed investments such as GIC’s and bonds, and the uncertainty of the volatile stock markets.

A prescribed annuity is a low-risk retirement vehicle that can increase your retirement income and reduce your annual income tax payable.

If you are retired or close to retiring, and are looking for a guaranteed steady stream of retirement income without the worries of outliving your savings, then a prescribed annuity could be right for you.

What is a Prescribed Annuity?

An annuity is a guaranteed and steady stream of income payments you receive from an insurance company in exchange for a lump sum of cash. The annuity payments can be for a specific number of years or the annuity payments can be for the rest of your life.

A prescribed annuity is an annuity purchased with non-registered funds that has distinct tax-advantages (an annuity can also be purchased with registered funds such as RRSP’s, and RRIF’s, but are fully taxable).

When you purchase an annuity with non-registered funds, you are taxed on the income in the year you receive it, but only a portion of each income payment is taxable.

With prescribed taxation, annuity payments will be a blend of interest and principal over the life of the contract so the tax is level for the life of the contract. This spreads out the tax payable evenly every year (otherwise early annuity payments would be almost all taxable interest as is the case if the annuity is taxed on an accrual basis).

Prescribed taxation is a powerful benefit unique to prescribed annuities and is available only if the annuity policy meets certain criteria (see Q & A section: What Qualifies as a Prescribed Annuity).

Ask yourself the following questions:

  • Have low interest rates and the volatile stock market had a negative impact on your retirement income?
  • Are you looking for better returns without taking any risks?
  • Are you trying to reduce your annual taxable income?
  • Are you afraid you might outlive your retirement savings?
  • Are you using non-registered fixed income investments to supplement your retirement income?
  • Are guarantees important to you?
  • Are you becoming more and more frustrated with the increasing cost of living along?
  • Do you find yourself losing sleep and worrying about market conditions?
  • Do you want to maximize your after-tax retirement income?
  • Are you in a high marginal tax bracket?
  • Are you getting clawed-back on your Old Age Security?

If you answered "Yes" to any of these questions then a prescribed annuity could be the answer.

The Challenge for Seniors

If you’re retired or near retirement you are focused on both investment safety and returns for your investments. You want these investments to supplement your retirement income, so you want to obtain the best return possible. This will often lead you to invest into guaranteed investment certificates (GIC’s) and bonds. These provide a guaranteed rate of interest and secured capital. The one drawback of this investment is that all income is received as interest and therefore, 100% taxable.

Prescribed Annuities can provide a higher income stream than most guaranteed products and have a distinct tax advantage when purchased with non-registered money.

Selecting retirement income options is one of the most important financial decisions a retiree or soon to be retiree will make. Because seniors are living longer, government sources such as; Canada Pension Plan and the Old Age Security may not provide adequate income to cover basic expenses.

An annuity is a great choice if you’re getting ready to retire. But it’s also an excellent solution if you are nearing retirement and looking for an ”income bridge” until other income sources begin.

We Shop the Annuity Market Daily

As independent annuity advisors, we are not limited by any one company’s pricing and products. In other words we’re an independent brokerage and what we do is research the best companies offering not only the best rates but have the best ratings so that your income stream in your retirement is going to be safe and secure.

Our goal is to continue to maintain a leadership role as Canada's provider of prescribed annuities.

If you have any questions or comments or would like more information please contact us we are here to help.

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