Effective November 27, 2021, the deferred sales charge and low load sales charge purchase options will no longer be available for purchase on Sun Life Global Investments mutual funds. Switches between funds of the same sales charge purchase option will be permitted.
Your corporate clients may not know Sun Life Guaranteed Investment Funds (GIFs) contracts owned at the corporate level offer several attractive benefits for business owners. GIFs are also known as segregated fund contracts.
Consider GIFs when selecting the appropriate portfolio investment vehicle as you work with corporate clients. A GIF is a life insurance contract that contains investments similar to those mutual funds offer. But, unlike mutual funds, GIFs offer guarantees. These guarantees can protect the value of a corporation’s investments at maturity or death.
Sun GIF Solutions is part of Sun Life Global Investments’ industry-leading suite that provides the growth potential of investment funds with the benefits of an insurance contract. Sun GIF Solutions is one product, but for many needs, combining three different series in one flexible contract. Corporations also have the flexibility to access money at any time.2
With Sun GIF Solutions, corporations can:
Sun GIF Solutions offers three solutions to meet a corporation’s evolving needs:
Grow savings – while enjoying the benefits of protection the GIF contract can provide.
Protection – and the efficiency of payments to your business may be critical in succession planning
Guaranteed lifetime income – with the flexibility to address all corporate planning needs
The corporation has the flexibility to move from one series to another, as the corporation’s needs evolve. In certain instances, business owners can make the series switch without incurring a taxable disposition.4
They can also create a guaranteed, market-based pension plan inside the corporation, with another GIF contract, Sun Lifetime Advantage GIF. This contract offers the ability to defer guaranteed income for life until desired.
Many business owners hold portfolio investments at the corporate level, for various reasons. Whether the funds are for retirement planning or for bridging potential downturns in the business, it’s critical that business owners are able to invest as they want, while ensuring that the bulk of the business’ funds are available as needed. Sun GIF Solutions – Estate Series offers a maturity guarantee of 75% of all deposits and a death benefit guarantee of 100% of all deposits (guarantees are reduced proportionately for withdrawals). The death benefit guarantee is eligible for an automatic reset each year until age 80; if the market value of the contract is higher than the current guarantee amount, the death benefit guarantee will automatically increase to equal the market value.
All income that the underlying fund in the GIFs earns during the year (except unrealized capital gains) is taxed in the year earned, regardless of whether clients take systematic withdrawals, and regardless of the amounts withdrawn. Note that there will be 2 sources of taxation: first, the GIFs must allocate all the income to policyholders each year; secondly, there will be tax consequences resulting from withdrawals by clients.
The following list gives more details about tax treatment:
After an income item becomes taxable, it’s treated as part of clients’ after-tax money, effectively the same as the premiums clients use to purchase the GIF, and isn’t taxed again when withdrawn. If clients take withdrawals from their fund (systematic or otherwise), part of each withdrawal will be treated as having been taken from the funds’ unrealized capital gains, if there are any, and part from the fund’s after-tax money. Once an unrealized capital gain is withdrawn, it’s treated as realized, and half the gain will have to be included in clients’ income for the year of the withdrawal.
For corporate clients, half of the capital gains (the untaxed portion) will create a credit to the corporation’s Capital Dividend Account (CDA). Amounts posted to the CDA can then be paid to the shareholder as tax-free capital dividends. CDA tax treatment is available only for private corporations that Canadian residents control. It’s not available for public corporations or for private corporations that non-residents control.
Unlike mutual funds, GIFs can flow net capital losses through to the owner of the contract. The corporate owner can apply these losses against other capital gains in the same year, or carry back those losses up to three years. This unique feature creates additional tax planning opportunities. The advantage ties in with the notion of investing in a greater proportion of equity-based funds due to consumer confidence in the underlying guarantees.
Ultimately, it’s not the responsibility of the brokerage to report capital gains and losses for mutual funds; it is that of the investor. Certain transactions that contribute to an increase in ACB may be overlooked, so non-registered investors, including corporations, can end up paying additional capital gains taxes unnecessarily. With Sun Life GIFs, the insurance company keeps track of each unit holder’s ACB. When units are redeemed, Sun Life Financial will calculate the realized gain or loss and report this on the investor’s T3 form. As such, there is no need to spend time tracking ACB or contract an accountant to do so.
Additional considerations & Structure flexibility
Although Sun Life GIFs is an insurance contract, it won’t create a material credit to a corporation’s CDA when the annuitant/insured person dies, as is the case with a corporately owned life insurance policy. However, the contract structure ensures that proceeds flow to the desired beneficiary at the appropriate time.
For example:
You can trust Sun Life Global Investments to help corporate clients grow their wealth and enhance their tax efficiency.
Security, expertise, and solutions to fit your situation
Founded in 1865, Sun Life has helped Canadians manage and grow their assets for over 150 years. The following reasons can give you confidence that your money is safe with Sun Life, and that we have the expertise and solutions to focus on meeting your needs:
Financial strength, disciplined risk management
Investment management expertise
Leading products and service
The preceding information is being presented with the understanding that it is intended for information purposes only.
1 Results from Ipsos poll conducted in November 2016.
2 Note that withdrawals will affect guarantees.
3 Some restrictions apply.
4 Moving from one series to another series will affect lifetime guaranteed income.
5 As at Dec. 31, 2020.
Sun Life GIFs are individual variable annuity contracts issued by Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies.
Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc., all of which are members of the Sun Life group of companies.
SLGI Asset Management Inc. is the investment manager of the Sun Life family of mutual funds; Sun Life Assurance Company of Canada is the issuer of guaranteed insurance contracts including Annuities, and Segregated Funds. Sun Life Financial Trust Inc. is the issuer of Guaranteed Investment Certificates.
