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.

Payout annuities advisor resources

Payout annuities are an excellent fit for Clients seeking guaranteed income with protection from market risk. 

Benefits of payout annuities

  •  

    Peace of mind. Offers Clients security when they retire by providing a guaranteed income for life or a period of time.

  •  

    Custom legacy options. Our payout annuities can be customized to fit each Client to provide legacy options to loved ones.

  •  

    Tax efficient and hassle-free income. There are no investment decisions required by Clients after purchase. Payout annuities may also offer tax advantages.

Payout annuity illustration tool

Create your own illustrations with current rates. For most of your sales, you don't need to contact us to get an illustration. You can log in to save, edit, manage or confirm quotes. 

 
Launching the tool:
  • For advisors or staff of Sun Life Financial Distributors (Canada), please log in to Advisor hub to access the advisor version of the tool.
  • If you're not an advisor or staff of Sun Life, please log in to the Sun Life Advisor site. Don't have a secure site log in? Here's how to register

Product overview

A payout annuity is an income-generating insurance product. In exchange for a lump-sum premium, the Client receives a series of guaranteed income payments for one lifetime, two lifetimes or a specified period of time.

Who are they for?

Canadians age 60 and over looking for a source of guaranteed income, usually for retirement.

For retired Clients, a key part of retirement income planning is ensuring that essential living expenses like groceries, rent and utilities are always covered. Income from a payout annuity can supplement other sources of guaranteed lifetime income such as Canada Pension Plan (CPP), Quebec Pension Plan (QPP), Old Age Security (OAS) or a defined benefit pension.

This “income floor” helps provide guaranteed lifetime income to pay those basic expenses. Clients who've covered the essentials have room to look at creative ways to generate lifestyle income in retirement.

Who else might benefit from a payout annuity?

  • Canadians approaching retirement who are looking for an income “bridge” until other sources of income begin.
  • Canadians of any age looking for income for a certain period of time.
  • Canadians seeking an option to gradually transfer their wealth.

Feature

Benefit

Income for life option

  • Life annuity - Clients can never outlive their retirement income
  • Joint life annuity - A client can provide lifetime income for a spouse even after the client dies

Market risk protection

  • Income is not affected by market or interest rate fluctuation
  • Clients are protected from making poor investment decisions

Inflation protection

Clients can choose to have income increase each year by a fixed percentage to help offset the impact of inflation.

Low maintenance income

Income doesn't require ongoing management for clients who aren't interested in managing their investments.

Death benefit

Clients can choose a period of time during which, if they die, we'll pay a death benefit.

Tax and Estate planning

  • Tax efficient income (non-registered annuities)
  • Income may qualify for tax credits and pension income splitting

Assuris protection

If a life insurance company fails, Assuris guarantees a policyholder will retain up to $2,000 per month or 85% of the monthly income amount, whichever is higher. For more details please see www.assuris.ca.

Attractive income

Guaranteed income that can be higher than many other income-generating products

Customizable

Many options to "customize" annuity to client needs

Annuitant - for life annuities, the person whose life expectancy we use to calculate income. This is also the person who must be alive at the end of the guaranteed period for payments to continue.

The annuitant is usually the policyholder. The annuitant must be the policyholder for annuities purchased with registered funds.

Beneficiary - is the person(s) or entity(ies) named to receive the death benefit.

Final payment - date is the date we make the last annuity income payment. We don't make any payments after this date. This applies to term certain and temporary life annuities.

Guaranteed period - is the time, chosen by the Client at issue, during which we'll pay a death benefit if the last surviving annuitant dies. The guaranteed period starts on the payment start date.

Impaired annuity (Essential Care Annuity) - is also known as an enhanced or age-rated annuity.

It's available for those with a life-shortening condition. An Essential Care Annuity provides higher income payments (or requires a lower premium) than an annuity for someone of the same age and sex with no health impairment.

Joint annuitant - for life annuities, we use this person's life expectancy, along with the life expectancy of the annuitant, to calculate income. The joint annuitant is also one of the two people who must be alive at the end of the guaranteed period for payments to continue.

Payment start date - is the date we make the first annuity income payment. The policyholder selects the payment start date and can't change it once we issue the policy.

Policyholder - is the owner of the contract.

Present value - is the value today of a future payment or series of future payments.

Purchase date - is the date we receive the completed application and the last premium. The contract takes effect on this date.

Residency requirements

The policyholder and the annuitant must be Canadian residents at the time of issue.
Exception: If the policyholder has an existing Sun Life Financial policy with a contractual right to purchase a payout annuity.

Issue ages

  • Registered (including locked-in funds) – Ages 18-1001
  • Non-registered – Ages 0-1001

Premiums

Minimum – $5,000 (combined total from all sources)

  • Premiums $2 million and over – Special pricing may apply. Illustrations must be run by Payout Annuity Customer Service Team.
  • Life annuities over $5 million require underwriting.

Annuity types

  • Life annuity
  • Temporary life annuity
  • Joint life annuity
  • Temporary joint life annuity
  • Term certain annuity
  • Joint term certain annuity

Currency

Canadian

Premium sources and annuity types allowed

  • Registered retirement savings plan (RRSP)
  • Registered retirement income fund (RRIF)
  • Locked-in retirement account (LIRA)
  • Restricted locked-in savings plan (RLSP)2
  • Deferred profit sharing plan (DPSP)
  • Life income fund (LIF)
  • Restricted life income fund (RLIF)2
  • Locked-in retirement income fund (LRIF)
  • Registered pension plan (RPP) funds3
  • Non-registered funds

 

Source of premium

Life

Term certain

Term certain to age 90

RRSP, RRIF

Yes

No4

Yes

Locked-in RRSP/LIRA/RLSP2, LRIF/ LIF/RLIF2, RPP

Yes

No

No

DPSP, Non-registered

Yes

Yes

No

 

Note: While a Client can purchase a payout annuity with funds from a TFSA, the annuity must be a non-registered prescribed annuity or a non-prescribed (accrual) annuity and the annuity income will be taxable.

Deferral periods

Maximum 10 years, subject to restrictions based on the source of premium.
For annuities with non-registered accrual taxation, deferral periods of greater than 10 years and less than 15 years can be requested. See “Deferring the start of payments” section for more details.

Guaranteed periods

0-40 years. Subject to restrictions based on the source of premium. See the “Guaranteed period” section for more details.

Payment frequency

  • Monthly, quarterly or semi-annually by direct deposit to a Canadian financial institution only.
  • Annually by direct deposit to a Canadian financial institution or by cheque.

Payment options

  • Level payments – Payment amount remains the same throughout the payment period.
  • Indexed payments:
    • Income increases yearly by a fixed percentage. The Client selects an increase from 1-4% at purchase.
    • Not available for prescribed annuities.
  • Reducing payment (joint life annuities) – Income reduces by a certain percentage selected at issue when one of the annuitants dies.
  • Integrated payment – Annuity income is set to decrease when CPP, QPP or OAS payments begin.
    • Not available for prescribed annuities.
    • Registered funds are subject to legislative restrictions.

Taxation

  • Registered annuity – Income from an annuity purchased with registered funds is fully taxable to the policyholder in the year it’s received.
  • Non-registered annuity – Income from an annuity purchased with non-registered funds can have prescribed, non-prescribed (accrual) or level tax treatment.
  • Withholding tax – Canadian withholding tax is mandatory for annuities purchased with RPP, LIF /RLIF, or DPSP premiums.

If the Client is a non-resident, the applicable rate of withholding tax will be deducted for any annuity that has been purchased.
See “Taxation” section for more details.

Death benefit

Death benefits depend on whether income has started, the source of the premium and the guaranteed period chosen. See “Death benefit” section for more details.

Surrender

A payout annuity can’t be partially or fully surrendered and has no cash surrender value.
Exception: A term certain annuity, that’s other than prescribed, may be surrendered on request and approval. There may be charges and market value adjustments.

Essential Care Annuity

For an annuitant with a life-shortening condition, we’ll consider issuing an impaired annuity. This can result in a lower premium or higher income than for someone of the same age and gender without a health impairment. Only life annuities can be impaired annuities. Term certain annuities don’t qualify.

Limits/minimums/maximums

Maximum issue age (before age rating)

Age 75

Premiums

Minimum: $10,000
Maximum: $5 million

Guaranteed periods

Minimum: 5 years
Maximum: Subject to restriction based on the source of premium.

Number of impaired annuitants (joint life annuities)

One or both annuitants can be impaired

Age rating

Minimum: 4 years
Maximum: 20 years

Illustrations for an Essential Care Annuity must be requested from the Payout Annuity Customer Service Team. See “Special annuities” section for more details.

How to produce an illustration

  • Create an illustration using the online illustration tool (available on the Sun Life website you usually use).
  • Illustrations that can’t be run on the online illustration tool can be requested from the Payout Annuity Customer Service Team.

Purchase date

  • This is the date that head office receives all premiums and the application form. It’s also the date that the contract takes effect.

Subject to legislative restrictions.
2 When using the Payout Annuity Illustration system, select the LIRA premium source for RLSP and the LIF premium source for  RLIF.
3 For RPP funds, important information can be found in the “Transfers from a registered pension plan to a Sun Life Payout Annuity advisor guide” (810-4343-Digital). Please reference this guide when submitting business with this source of  funds.
4 For RRSP and RRIF premium sources, a term certain to age 18 is  allowed.

Life annuity

A life annuity provides payments for as long as the annuitant lives.

Joint life annuity

A joint life annuity provides payments for as long as either the annuitant or joint annuitant lives.

Term certain annuity 

Term  certain for single annuitant or joint annuitants 

A term certain annuity provides payments for a selected period of time. We pay a death benefit if the last surviving annuitant dies before we've made all the payments. We don't make any further payments after the payment period ends.

Term  certain annuity to age  18

When a financially dependent minor child or grandchild of a plan owner receives a lump-sum payment from the plan owner's registered retirement savings plan (RRSP), registered retirement income fund (RRIF), or registered pension plan (RPP) because the plan owner has died, the minor will have to include this payment as income.
However, the minor may claim a deduction for income tax purposes if they use some or all of the lump-sum to buy an annuity with a term that doesn't exceed 18 minus their age when they acquire the annuity. This is called a term certain annuity to age 18. The annuity income payments will be fully taxable to the  minor/child.
A term certain annuity to age 18 is the only option as the number of years of the term must not exceed 18, less the minor or child's age at the time the annuity is acquired. The annuity is non-registered, but the payments are fully taxable, and the minor or child is responsible for any tax payable on the income from the annuity.

Term  certain to age 90

For RRSP and RRIF sources of premium, a term certain annuity to age 90 is available for single and joint annuitants, where allowed by legislation.

Temporary annuity (life and joint life)

A temporary life annuity provides payments for a selected period of time, as long as the annuitant - or, in the case of a joint annuity, one of the annuitants - is alive. We don't make any further payments after the payment period ends. Temporary life annuities are usually purchased as part of an integrated annuity arrangement and are rarely sold “standalone”.

Special annuities (essential care annuity)

STEPS
1. Advisor – Submit medical evidence
2. Underwriter – Review and communicate decision
3. Advisor – Request illustration
4. Advisor – Confirm sale and submit business

STEP 1 Submit medical evidence

Medical evidence of no  older  than  six  months  must be submitted for review by our underwriters to determine if a Client qualifies for an Essential Care Annuity. Once the file has been reviewed, you'll receive an email with the results and a reference number. An age rating is valid for six months. Subsequent renewals5 will be subject to full underwriting.

We require an Impaired annuities medical form (4525), which is to be completed by the Client's family doctor or attending physician. The Client is responsible for all costs associated with providing medical evidence. If the Client has been underwritten in the last six months for individual insurance, we'll use the medical evidence on file. If the insurance is:

  • with Sun Life, we'll use the medical evidence internally.
  • external, we'll use the medical evidence with the expressed written consent of the Client. We have a standardized exchange of medical evidence in place for participating companies.

Being declined or postponed for life insurance doesn't automatically qualify an applicant for an Essential Care Annuity.
Submit medical evidence via:

STEP 2  Review and communicate decision

Our underwriters will review the file and determine if the Client(s) qualifies for an Essential Care Annuity. They'll send you an email with their results and a reference number.

STEP 3  Request illustration

Request illustrations from the Payout Annuity Customer Service Team. You'll need to provide them with the age rating(s) along with the annuity details such as date of birth, source of premium, purchase date, income start date, etc.

STEP 4  Confirm sale and submit business

To confirm the sale, you can either reply with history to the email from servicenow@sunlife.com which provided you with the quote, phone the Payout Annuity Customer Service Team or fax 1-866-487-4745.

You must enter the age rating and reference number on the application form. We'll use the reference number to confirm the age rating when we calculate the final income as part of issuing the policy.

5 If the age rating is expired at the end of six months, Sun Life requires new medical evidence to re-underwrite the file to determine if an offer can be made for another six months.

New business support

Complete all sections of 3318-E - Application for a payout annuity

This 'fillable' PDF allows you to type information directly on the application. With pre-determined business rules, only the sections and fields that must be completed are displayed. You can then print the application and get the client's signatures. If you prefer to collect the client's signatures while you are completing the application online, the Signature and declaration section can be printed separately.

Tips for completing the application

  • Detailed instructions are on the last page of the application.
  • Complete all applicable sections of the application. Missing information will delay the issue of the policy.
  • Be sure to write the policy number on all correspondence.
  • If funds are coming from an external company, please initiate any external transfer.
  • Attach a copy of the illustration to provide details of the sale.

When you’ve completed the application, you can send the application package to us:

  • Mail: Sun Life Assurance Company of Canada, PO Box 1601 Stn Waterloo, WATERLOO ON ,N2J 4C5
  • Fax: 1-866-487-4745
  • Electronically through your advisor site (or by e-mail at servicenow@sunlife.com with the policy number in the subject line)

 

Beneficiaries
  • If the Beneficiary(ies) section is left blank, we'll issue the contract with the policyholder's estate as the beneficiary. Changing this requires a separate request.
  • Ensure that you have the signatures of any irrevocable beneficiaries assigned to products being used to fund the payout annuity.
 
Signatures

We will accept original signatures, or a digital version of the signature (actual scribble) via fax or scanner. If you printed the Signature and declaration section separately, ensure that it is included when you send the application.

 

Quebec applications

We'll send French correspondence for clients residing in Quebec. Check the language of correspondence box if your client prefers English.

 
Proof of age

Please attach a copy of the proof of age. If you don't attach a copy, you must record the registration number, issue date of the document and country of issue.

 
Non-registered funds
 
Locked-in funds (RPP, LIF, LRIF, Locked-in RRSP or LIRA)
  • For a single life annuity where there is no spouse, complete the spousal declaration question in the Annuity details section.
  • If there is a spouse, and the client is applying for a single life annuity, or a joint life annuity which reduces to less than the minimum percentage allowed by the applicable provincial legislation, a spousal waiver for the applicable province must be submitted along with the application.

Purchasing payout annuities with multiple premiums

Multiple premiums

Clients can use multiple premiums to purchase a payout annuity contract. For example, a Client may have two RRSP accounts, each at a different financial institution. The Client can use funds from both accounts as a premium to purchase a payout annuity contract.

We'll issue the contract once we receive all premiums. The date we receive the application and the last premium is the purchase date. Unless a rate guarantee is in effect, we'll use the rate basis in effect on the date we receive the last premium to calculate income for the payout annuity contract.

 
Multiple annuities in one contract

Clients can also use premiums from multiple sources (i.e. multiple tax types) to purchase a payout annuity contract. For example, a Client may have RRSP accounts at three different financial institutions and a non-registered savings account. The Client can use funds from all accounts as a premium to purchase a payout annuity contract.

Because the premium sources are governed by different policy provisions, we would use the RRSPs to fund one annuity and the non-registered savings to fund another. Both annuities would be in the same payout annuity contract.

The Client will receive a contract document with a section for the contract-specific policy provisions, and a separate section for each annuity with the policy provisions specific to that annuity.

Illustrations online

For your convenience, you can create your own illustrations using our online illustration tool. Rates are always current on the tool. For most of your sales, you don't need to contact us to get an illustration.

Payout annuity illustration tool

 

Illustration tool output
You'll be able to:
  • print an illustration in PDF format (Adobe Acrobat electronic file).
  • produce several versions of the illustration.
  • save your illustrations and retrieve them later to review
  • edit or recalculate the saved illustration with current rates
  • hold the rates by confirming the sale online

Note: If you close the window or exit the illustration without saving it, your information will be lost.

 
Illustrations you must contact us for:

For these special illustrations, call the Payout Annuity Customer Service Team at 1-800-800-4SUN\4786, option 4, then 2.  They include:

  • Premiums $2 million or over on any one life (these require special rates)
  • Pension funds that have both pre- and post-legislation funds
  • Age-rated illustrations
  • Income to be integrated with Old Age Security (OAS), Canada Pension Plan (CPP), and Quebec Pension Plan (QPP)
  • Enhanced income rates on qualified internal money
  • Minimum income guarantees on qualified internal money
  • Money coming from a non-registered life insurance policy

Rate basis

We calculate the rate basis using:

  • current mortality and expense assumptions, and
  • current interest rates.
Rates change daily

We review and may change the rate basis each day - typically because interest rates change.

  • The income shown on your illustration is valid for the current day and the next 2 business days. Therefore the rate basis on the illustration is guaranteed until midnight of the rate guarantee date indicated on page 1 of the illustration.
  • For example: if the illustration is done on Monday, the rate would be valid and guaranteed until midnight on Wednesday. If the illustration is done on Friday, Saturday or Sunday, the rate would be valid and guaranteed until midnight on Tuesday.
  • This longer quote period gives you more time for your sales discussion with your client.
Holding the rate basis
  • To lock-in the rate that's in effect on your illustration, you must confirm the sale with us before midnight eastern time on the rate guarantee date indicated on page 1 of the illustration.
  • Confirming your sale means you can hold the rate for your client for 45 calendar days.
  • This guarantees the rate basis only, not the amount of the income. Income can change based on a number of factors including the final amount of premium received, the actual purchase date we receive all premium, forms, etc.
  • To get the held rate basis, we must receive all required forms and premiums in our office within 45 days of the date the sale is confirmed. After this time, we'll prepare another illustration, using the rates in effect at that time.

By web

After you have made the sale, you'll need to save (or retrieve) the illustration you sold. You can then confirm your sale online. This function will automatically record the sale in our system, and immediately generate a policy number for you to include on the application.

If you have not used the save feature on the illustration tool software, you can continue to confirm by phone or fax.

 

By phone

You can call us on business days between 8 a.m. and 6 p.m. eastern time at 1-800-800-4Sun\4786, option 4, then 2. If you are calling between 6 p.m. and 12:00 a.m. eastern time, you may leave a message asking us to confirm the sale for that day. Leave us your name, phone number and e-mail address. We'll be in touch with you the next day to get the details of the sale and provide a policy number for you to include on the application.

 

By fax

Fax your illustration to us at 1-519-888-3485, with a note asking us to confirm the sale. Please include your name, phone number, fax number and your advisor number.

 

If you confirm a sale in error

If you confirm a sale in error please contact us immediately by:

  • phone at 1-800-800-4Sun\4786, option 4, then 2. If you call after 6 p.m. eastern time, just leave us a message and we'll be in touch to get the details.
  • e-mail at Servicenow@Sunlife.com with "payout sale confirmed in error" in the subject line. Please include your name and advisor number, the policy number assigned to the sale, and the name of your client in the e-mail.

 

If the sale isn't confirmed

If our Payout Customer Service Team receives an application without a confirmed sale, a Customer Service Representative will confirm your sale the day we receive it by creating an illustration using the rate basis in effect that day.

Product details

We periodically send out a client confirmation form (CCF) - also known as a certificate of existence - to clients who are receiving payments. The CCF helps to ensure we make payments according to terms of the contract, and maintain current client information such as addresses, Power of Attorney and authorization documents.

We mail a CCF every two years on the annuitant's birthday. We send a covering letter and the form to all clients who have life or temporary payout annuities. For clients with more than one policy, we target a "consolidated" mailing so they receive only one form.

If we don't receive a response within four weeks, we'll send a second letter and form. If we still don't receive a response after a total of 8 weeks, we'll suspend payments.

Any death benefit we pay depends on the guaranteed period, the source of premium or whether income has started.

The chart below reflects current legislation and Sun Life Financial practices. Review the policy pages for a specific policy as they could contain legislative requirements or options not outlined below. For example, some legislative changes are date-specific.

Note: If the beneficiary is the estate, we'll pay the death benefit only as a cash lump sum.

Death benefit upon death of the annuitant (single life) or the last surviving annuitant (joint life)

RPP, LIF, LRIF, RLIF

A death benefit is payable regardless of a guaranteed period.

Return of premium without interest  - Nova Scotia, Ontario, Alberta, British Columbia, Manitoba, Newfoundland and Saskatchewan.

Note: Return of premium plus interest is available upon request for Alberta, British Columbia, Manitoba, Newfoundland and Saskatchewan.

Return of full premium plus interest13 - Quebec and New Brunswick.

Commuted  value14 -  PEI,  Indian  Band  and PBSA15 (which includes Nunavut, North West Territories and Yukon). Payment will be taxable to the beneficiary, however, if the spouse is the beneficiary, the spouse has the option to transfer it to a registered product.

The beneficiary can choose to do one of the following:

  • Receive a cash lump sum equal to the present value of the payments remaining in the guaranteed period, calculated at the date of the death using current interest rates.
  • If allowed by the contract, continue to receive payments for the time remaining in the guaranteed period.

Note: Payments from both options will be fully taxable to the beneficiary and will be subject to any applicable withholding tax.

LIRA, locked-in RRSP, RLSP

A death benefit is payable regardless of a guaranteed period.

Return of premium without interest  -

Nova Scotia, Ontario, Alberta, British Columbia, Manitoba, Newfoundland, Saskatchewan.

Note: Return of premium plus interest is available upon request for Alberta, British Columbia, Manitoba, Newfoundland and Saskatchewan.

Return of full premium plus interest16 - Quebec and New Brunswick.

Commuted value17 - PEI, Indian Band and PBSA18 (which includes Nunavut, North West Territories and Yukon).

If the beneficiary isn't the spouse, the payment will be taxable to the deceased.

If there's a spouse, and the spouse chooses to take the payment as cash, the payment will be taxable to the deceased.

If the spouse chooses to transfer the payment to a registered product, the spouse is taxed.

If the beneficiary is the spouse, he or she can continue to receive payments for the time remaining in the guaranteed period. These payments will be fully taxable to the spouse.

If the beneficiary isn't the spouse, or the spouse chooses to take the death benefit as a lump sum, we'll pay the death benefit equal to the present value of the payments remaining in the guaranteed period, calculated at the date of the death using current interest rates. The value of the death benefit on the date of death is taxable to the deceased.

Note: Canada Revenue Agency (CRA) rules state that if a payout annuity is purchased with LIRA or locked-in RSP funds, the annuity is treated like a matured RRSP and RRSP tax treatment applies.

RRSP, RRIF

A death benefit is payable regardless of a guaranteed period.

Return of premium without interest.

Return of premium with interest is available upon request.

RRSP:  If the beneficiary is the spouse, the spouse can transfer the death benefit to their own RRSP or RRIF. We would issue a T4RSP tax slip (Relevé 2 for Quebec residents) reporting the death benefit as a refund of premiums.

If the beneficiary isn't the spouse, we'll issue a T4RSP tax slip (Relevé 2 for Quebec residents) to the deceased for the value at the date of death.

RRIF: If the beneficiary is the spouse, the spouse can transfer the full value of the death benefit to their own RRSP (if they are under age 71) or RRIF. The death benefit payable would be tax reported to the spouse.

If the beneficiary isn't the spouse, the death benefit will be tax reported to the deceased in the year of death.

If the beneficiary is the spouse, he or she can continue to receive payments for the time remaining in the guaranteed period. These payments will be fully taxable to the spouse.

If the beneficiary isn't the spouse, or the spouse chooses to take the death benefit as a lump sum, we'll pay the death benefit equal to the present value of the payments remaining in the guaranteed period, calculated at the date of the death using current interest rates. The value of the death benefit on the date of death is taxable to the deceased.

DPSP

A death benefit is payable regardless of a guaranteed period.

Return of premium without interest.

Return of premium with interest is available upon request.

Payment will always be taxable to the beneficiary. If the spouse is the beneficiary, the spouse has the option to transfer to a registered product.

The beneficiary can choose to do one of the following:

  • Receive a cash lump sum equal to the present value of the payments remaining in the guaranteed period, calculated at the date of the death using current interest rates.
  • If allowed by the contract, continue to receive payments for the time remaining in the guaranteed period.

Note: Payments from both options will be fully taxable to the beneficiary and will be subject to any applicable withholding tax.

Non-registered funds

Return of premium without interest.

Return of premium with interest is available upon request.

Note: We'll pay the return of premium death benefit whether or not there's a guaranteed period.

We'll provide the present value of the guaranteed payments on request, if there's a guaranteed period.

For annuities with:

  • Prescribed or Accrual taxation - the growth will be taxable to the deceased.
  • Level taxation - the growth will be taxable to the beneficiary.

The beneficiary can choose to do one of the following:

  • Receive a cash lump sum equal to the present value of the payments remaining in the guaranteed period, calculated at the date of the death using current interest rates.

For annuities with:

  • prescribed tax treatment, any taxable policy gain will be tax reported to the deceased in the year of death.
  • level tax treatment, any taxable policy gain will be tax reported to the beneficiary in the year in which the payment is made.
  • accrual tax treatment, any taxable policy gain will be tax reported to the policyholder in the year of death.
  • Continue to receive payments for the remainder of the guaranteed period:
  • For annuities with:
  • Prescribed and level tax treatment, the taxable portion of these payments will be taxable to the beneficiary.
  • Accrual tax treatment, any taxable gain is tax reported to the policyholder in the year in which a death occurred. This includes the death of the policyholder, joint policyholder, annuitant or joint annuitant. We'll calculate a new accrual schedule based on the lump-sum value.

There is no death benefit if the annuitant(s) dies after:

  • the income start date and there is no guaranteed period
  • the end of the guaranteed period

13  Return of premium plus interest option is calculated as the return of premium at the legislated interest  rate.
14 Commuted value is a calculation that Sun Life Financial does. It corresponds to applicable legislation. We use an interest rate that is in effect on the later of the date of death of the annuitant or the surviving  annuitant(s).
15  PBSA = Pension Benefit Standard Act
16  Return of premium plus interest option is calculated as the return of premium at the legislated interest  rate.
17 Commuted value is a calculation that Sun Life Financial does. It corresponds to applicable legislation. We use an interest rate that is in effect on the later of  the date of death of the annuitant or the surviving  annuitant(s).
18 PBSA = Pension Benefit Standard Act

The information in this section reflects our understanding of current federal and provincial income tax laws. Taxation laws are subject to change; rules and restrictions may differ in the future. It's important to encourage clients to seek advice from a tax consultant regarding the tax implications for their individual situation.

Registered annuity

Income from an annuity purchased with registered funds is fully taxable to the policyholder in the year it is received.

Non-registered annuity

Income from an annuity purchased with non-registered funds can have one of three different tax treatments - accrual, prescribed or level.

Accrual (non-prescribed) taxation

Note: If a policyholder is under 65 and purchases an annuity with an amount received as a result of the death of a spouse or common-law partner, the annuity income may qualify as eligible pension income.

Annuities receiving accrual taxation treatment report a varying amount of tax annually. Generally, non-prescribed annuities have larger taxable amounts in the early years of the policy and the taxable portion decreases each year.

Prescribed taxation

All annuities are taxed on an annual basis and receive accrual tax treatment. All annuities are taxed on an annual basis and receive accrual tax treatment unless they qualify for prescribed tax treatment. During the payout period, the payments from an annuity receiving prescribed tax treatment are considered to be a level blend of interest and capital so a fixed portion of each payment will be taxable.

Qualifying for prescribed taxation

To qualify as a prescribed annuity, the contract must satisfy the following conditions:

  • The policyholder(s) must also be the annuitant(s). The policyholder can be a testamentary or spousal trust.
  • A joint life annuity is permitted if the second annuitant is either:
    • a brother or sister of the first annuitant (policyholder), or
    • a spouse of the first annuitant.
  • The annuity must be non-commutable.
  • Annuity payments must start by December 31 of the year following the year of purchase.
  • Annuity payments must be equal, not indexed, and made regularly and at least annually. Payments may reduce on the first death under a joint life annuity.
  • Annuity payments can be for:
    • a fixed term (term certain annuity), or
    • the life of the annuitant(s) (life or joint life annuity).
  • For an annuity with a guaranteed or fixed term, the term cannot extend beyond the annuitant's 90th birthday. For joint life annuities, the age of the youngest annuitant can be used.

Prescribed taxation applies automatically if the above conditions are met.

A policy could change tax treatment during a year if one or more of the qualifying conditions changes. For example, an annuity could meet all the criteria for prescribed taxation except the income start date is five years after purchase. Tax treatment would start as accrual but when payments begin, the tax treatment would change to prescribed.

Level taxation

Any unreported taxable gain (interest earned) from a life insurance policy issued prior to December 2, 1982, isn't taxable until the policy is surrendered or annuitized. Upon annuitization, any unreported taxable gain will be spread over the expected number of annuity payments.

Taxation during the deferral period

Annuities purchased with registered money: Registered annuities are non-taxable during the deferral period.

Annuities purchased with non-registered money: Any income accrued (aka earned) during the deferral period is taxed on an annual basis.

Withholding tax

Sun Life is required to deduct tax from certain types of payments. Sun Life pays that tax directly to the Canada Revenue Agency (CRA). The withholding tax percentage is determined by the CRA. The client claims the income and any tax withheld on their yearly tax return.

The payment the client receives is net of withholding tax. Note: Illustrations and policy pages show gross income not net income. The following information applies to Canadian residents:

Premium sources

RPP

RRSP

LIRA/ RLSP

RRIF

LIF/RLIF

LRIF

DPSP

Non Reg

Tax withheld?

Yes

No

No

No

Yes

No

Yes

No

Note: For non-registered funds, tax can be withheld but it must be a flat amount. For all other sources of funds, tax or additional tax can be withheld and can be a percentage or a flat amount.

Taxation of non-residents

When the policyholder of a payout annuity becomes a non-resident, we base their non-resident withholding tax on the source of funds used to purchase the annuity and the policyholder's country of residence, provided that the client supplies us with an NR301 form Declaration of Eligibility for Benefits Under a Tax Treaty for a Non-Resident Taxpayer. If we do not have this form, the government requires us to withhold 25 per cent.

For a deferred annuity, no tax form is issued during the deferred period. Once payments begin, Canada imposes a withholding tax.

Pension income: Eligible income, tax credits and income splitting

Income that qualifies as "eligible pension income" can receive preferential tax treatment.

Annuity income that qualifies as pension income:

The age of the annuitant determines if their income qualifies as eligible pension income, regardless of the premium source. Income for annuitants under the age of 65 does not qualify as eligible pension income. Income for annuitants age 65 and over qualifies as eligible pension income.

Pension income tax credit

A taxpayer can claim a federal tax credit on up to $2,000 of eligible pension income. As well, most provinces offer a tax credit on eligible pension income.

Pension income splitting

A taxpayer can transfer up to 50% of eligible pension income to their spouse. This transfer is for income tax purposes only and it does not transfer ownership of the income to the spouse. Because the transfer can result in an increased tax liability for the spouse, both the taxpayer and their spouse must file a special election form with their annual tax returns to allow this transfer.

Pension splitting can result in significant tax savings for a taxpayer and their spouse:

  • Transfer income from a higher-income spouse to a lower-income spouse.
  • If the receiving spouse does not have other eligible pension income, it allows the couple to claim an additional pension credit. This is an advantage even if both spouses have the same tax rate.
  • If the transferring spouse has net income above the Old Age Security (OAS) clawback amount, pension income splitting with a lower-income spouse could reduce or eliminate the clawback, keeping more money in their pocket.

An example of the benefits of creating eligible pension income

Jim, age 70, lives in BC. His marginal tax rate is 32%. His wife Karen has a lower marginal tax rate of 20%. Jim currently does not have any eligible pension income. If he buys a life annuity using $500,000 of his non-registered savings his:

  • Annual income is $45,514,
  • Of that income $9,800 is taxable,
  • The $9,800 is eligible pension income so,
    • he can allocate $4,900 to Karen for tax purposes.
    • they both can claim pension income credits of $2,000 of pension income, saving each of them up to $300 in federal tax credits and $51 in provincial tax credits.

Avoiding OAS clawback

If a taxpayer's taxable income is too high, some government benefits may be reduced or not available. Or, the taxpayer may not qualify for some income-tested tax credits.

Investment income is included in taxable income at different rates. For example, interest income is included on a tax return at 100 per cent, and dividend income is "grossed up" before it's included in income. For income from a prescribed annuity (non-registered), only a portion of a payment is taxable and the taxable portion is the same every year.

A client may be able to restructure their investment portfolio to reduce their taxable income by using some of their assets to purchase a prescribed payout annuity. The client can maintain a desired level of income but reduce taxable income, which will allow them to avoid the clawback or disqualification from some benefits or credits.

Potential creditor protection

If the annuity is purchased with locked-in money, the contract and the income may be protected from creditors based on applicable pension legislation.

If the annuity is purchased with non-locked-in money, during the guaranteed period, the contract and income may be protected if there is an appropriate family or irrevocable beneficiary designation.

Internal money that qualifies for:

Enhanced income provides a benefit to your clients who use the money from their qualified Sun Life Financial products to purchase a payout annuity. Normally, commission in these cases is paid according to the reduced commission scale, however, at this time we are paying full commission.

Option 5 is a contractual obligation that exists in some of our life, group and wealth products. It entitles the client to enhanced income from settlements or transfers to annuities that we offer.

Note:  Payout annuities accept both registered and non-registered sources of money.

The following outlines which internal products qualify for enhanced income rates.

Sun Life Financial - Wealth

Source of premium

Option 5
(Qualifies for enhanced income)

Superflex, RRIF (XA/XR)

Life annuity -Yes. Only death claims issued between December 6, 1982 and November 14, 1990 (2.0%)

Term certain - Yes. Only death claims issued between December 6, 1982 and November 14, 1991 (1.0%)

Pre-Superflex

Life annuity - Yes. Only for policies issued within the dates below:

  • 2.5% issued prior to Nov. 1, 1979
  • 2.0% issued on or after Nov. 1, 1979

Term certain - Yes. Only for policies issued within the dates below:

  • 1.5% issued prior to Nov. 1, 1979
  • 1.0% issued on or after Nov. 1, 1979

Sun Fund

Life annuity - Yes. 2.0%

Term certain - Yes. 1.0%

Sun Life Financial - Life products

Deposit source

Option 5
(Qualifies for enhanced income)

All life policies

Life annuity - Yes. Only for policies issued within the dates below:

  • 2.5% issued prior to Nov. 1, 1979
  • 2.0% issued between Nov. 1, 1979 & March 4, 1992
  • 2.0% issued between March 4, 1992 & Feb. 12, 1996 (term only)

Term certain - Yes. Only for policies issued within the dates below:

  • 1.5% issued prior to Nov. 1, 1979
  • 1.0% issued between Nov. 1, 1979 and March 4, 1992
  • 1.0% issued between March 4, 1992 and Feb. 12, 1996 (term only)

Sun Life Financial - Group

Deposit source

Option 5
(Qualifies for enhanced income)

Transfer from GRS pensions

Life annuity - Yes. Only if GRS contract reflects option 5 discount 2%
Term certain - Yes. Only if GRS contract reflects option 5 discount 1%

Some life insurance contracts and wealth contracts guarantee a minimum income if the settlement/maturity value is used to purchase a Sun Life Financial payout annuity. In some cases the minimum income guaranteed by the originating contract may be higher than the income from a current payout annuity.

Generally the following could have minimum income guarantees that provide higher income than a current payout annuity:

  • older life insurance contracts
  • certain wealth contracts purchased before December 6, 2009.

In addition, if a policy has a minimum income guarantee, the larger the premium the less likely it is the income guarantee will be higher than a current payout annuity.

Note:The minimum income guarantees have no effect on commission.

If you think a policy may qualify for a minimum income guarantee:

1.Confirm if the policy has a minimum guarantee income, by:

  • Reviewing the policy pages (the provision usually appears towards the end of the contract and can appear as text or a table), OR
  • Checking the list of policies that qualify.

2.Confirm if the minimum income guarantee is higher than a current payout annuity* contract by requesting an income comparison from head office using the regular special illustration process.

  • *If the originating policy has an income enhancement provision (e.g. Option 5), the current payout annuity income compared to the minimum income guarantee will include the income enhancement.

Administration rules that apply when electing a minimum income guarantee:

Combining deposits

Life policies, we will combine deposits from other internal policies if the other policy(ies) is:

  • from the same company of origin, and
  • from the same business line, and
  • has the same issue year range.

Wealth policies, we will combine deposits from other internal policies if the other policy(ies) is:

  • from the same plan, and
  • from the same business line, and
  • has the same issue year range.

We will not combine deposits from:

  • external sources (e.g. cash or other external policies.)
  • another internal policy that does not have:
    • a minimum income guarantee, OR
    • does not have the same company of origin or plan, business line or issue year range.
  • The minimum income guarantees in the originating contracts are usually expressed as a certain dollar amount per $1,000 of settlement/maturity value and specify the type of annuity (e.g. Single life), the income start date and a guarantee period (e.g. 10 years). In certain cases some choices may be restricted. For example, a joint life annuity is an option, however a minimum income guarantee will only apply to the joint annuity if the originating life insurance contract specifies it as an option.
  • Most minimum income guarantee provisions specify that the income start date and purchase date must be the same. SLF will allow a client to choose a later income start date; income will not be adjusted in these situations.

Minimum income guarantees do not apply if purchasing:

  • an Essential Care Annuity
  • an annuity with indexing or a joint life annuity with income reduction, unless this option is specified in the originating contract
  • an annuity with a guaranteed period that is longer than 20 years, unless this option is specified in the originating contract

Note:legislative requirements may restrict some options.

Policies that qualify for the minimum income guarantees

The following internal policies qualify for the minimum income guarantees:

Life insurance policies

  • Sun Life - Series 79 and prior

Wealth policies - Guaranteed

  • Income Master
  • Non-Redeemable GIA
  • Retirement Income Fund
  • Single Premium Retirement Annuity
  • Sun Accumulation Deferred Annuity
  • Sun Flexible Premium Annuity
  • Superflex Deferred Annuity

Wealth policies - Segregated funds

  • SunWise Elite*
  • SunWise Essential Series*

*SunWise Elite Plus - with GWB Payment Option Lifetime Withdrawal Amount is not eligible for a minimum income guarantee
** SunWise Essential Series - Income Class is not eligible for a minimum income guarantee

Marketing materials 

To order printed copies of these marketing materials, please visit the online ordering page

Note: You will be taken to the Sun Life Advisor site.

PDF

Title and description

Last updated

Ordering

810-4880

Defined benefit pension plan - Options upon retirement or termination of employment (1 page fact sheet) Explains the options members of a defined benefit pension plan have when leaving an employer.

October 2020

PDF only - Please print the PDF

810-3865

Overcoming payout annuity objections - (8 page guide) "I want my money to grow." "Interest rates are too low." Address these and other client objections about payout annuities with this informative 8-page guide.

April 2019

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810-3744

Client guide to payout annuities - (8 page guide) This guide is designed to educate clients about the benefits of payout annuities. It includes features and benefits, how they work, payment types and benefit information.

October 2020

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810-3737

Meet your income needs while delaying your CPP - (4 page client brochure). Explains how to use a term certain annuity to bridge income until an investor is ready to take CPP income.

October 2020

PDF only - Please print the PDF

810-3726

Payout annuity advisor guide - (28 page advisor guide) Your guide to the payout annuity product. The document provides detailed information that will help you more fully understand this product.

June 2019

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810-3725

Payout annuity - Product at a glance -  (2 page product at a glance) Highlights the features of the payout annuity product. This will help you become more familiar with the product. Advisor use only.

October 2020

PDF only - Please print the PDF

810-3413

Enjoying your retirement? - A legacy plan - (2 page fact sheet) Explains how to use a payout annuity to distribute the proceeds of an estate while the investor is still living.

October 2020

PDF only - Please print the PDF

810-3412

Retiring? Make sure your money will last - (2 page fact sheet). Explains how to use a joint life annuity to provide a guaranteed paycheque for life.

October 2020

PDF only - Please print the PDF

810-3334

Payout annuities - Worry-free retirement income (6 page brochure) Provides an overview of the payout annuity product and how it can serve as a guaranteed part of a client's retirement plan. Use this with your clients to support a walk through of the product or give to them as a take-away following a discussion of the product.

October 2020

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