Term Certain Annuity
The term certain annuity provides your clients with a regular guaranteed income for a specified duration. If the annuitant dies before the end of this period, the annuity is paid to the beneficiary.
Advantages
- Provides a guaranteed income for a specified period of time
- Safe from market fluctuations
- No management necessary
- No minimum age to purchase
- Non-registered annuities are eligible for pension income tax credit and pension income tax splitting
Options
- Indexation: to offset the effects of inflation, the annuity can be indexed at an annual percentage rate.
Factors that influence annuity payments
- Amount paid
- Date funds are received
- Date of first payment
- Payment period
- Interest rate in effect when the annuity is issued
Source of eligible funds
- Registered annuity
- Non-registered annuity
Minimum premium
Annuity payment
- The annuity can be paid by direct deposit or cheque
- The annuity can be paid monthly, quarterly, semi-annually or annually
- Tax witholding permitted on request
- Annuities with payments of less than $300/year or $25/month are rejected.
End of annuity payments
- At the end of the payment duration
Changes
Surrender
- The annuity may be surrendered at the commuted value
- The prescribed annuity is non-redeemable
Taxation
- Registered annuity: All the payments received are taxable
- Non-registered annuity
- Prescribed: taxed at same rate each year
- Non-prescribed: tax rate decreases throughout the contract
