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All You Need to Know About Annuity Planning in Canada! 

Retirement planning is laden with too many decisions that you have to make in order to solidify the foundation for a secure future. You need to invest money from an early age to take advantage of better returns. There are various investment options available and annuity is one of those options. Annuity planning in Canada is one of the crucial options that individuals have to decide upon for their retirement. In this article, we will take you on a journey to annuity planning in Canada.

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The World of Investment

There are many retirement plans for you to choose from including employment pension plans, registered retirement savings plans (RRSP), registered retirement income funds (RRIF), and non-registered retirement plans. Seniors can also enjoy the benefits of plans like Old age security (OAS), Canada pension plan (CPP), and Guaranteed Income Supplement (GIS). Amongst the series of tools, RRSP are the most preferred ones for creating a stress-free future life, however, you will not have unlimited access to them. As per the government guidelines, you need to wind up your RRSP account on the 31st December of the year you turn 71.

You can transform that account into RRIF, annuity, RRSP, or a combination of both. When you buy an annuity from the funds of LIF, RRIF, LRIF, RRSP, it is considered as registered annuities.  You can also purchase it from non-registered accounts like TFSA, or GICs.

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What is an Annuity?

An annuity is deemed as an insurance product that offers to pay you a steady income over a stipulated period. You pay an aggregate amount to the insurance company when you buy an annuity, and that converts into an income when you retire. You can get your income on a monthly, quarterly, or semi-annual basis, as per your preference. For understanding annuity planning in Canada, you need to understand the types of annuity. So, let’s get into that. 

Term Annuities

As the name suggests, term annuities mean you will get a guaranteed income for a certain period of terms like 10,15, or 20 years. If you pass away before the term ends, your payments will still be credited towards your beneficiary until it ends.

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Life Annuities

In this, you will get steady pay for a lifetime. However, once you pass away, your beneficiaries are not entitled to these payments. 

These main life annuities are also accompanied by some additional benefits that you can purchase along with your annuity as mentioned below.

Joint Life and Survivor Annuity

This annuity gives the guarantee of providing income in the form of two annuities like a couple. Hence, if the first annuity is not applicable anymore, you have the other one to rely on unless you pass away.

Guarantee period

This annuity has the advantage of providing guaranteed term options, like getting payments from 1-25 years. In case you die, these payments will prevail towards your beneficiaries or state until the term ends. 

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Inflation Protection

This annuity gives the provision to protect yourself from inflation. This raises your annuity in conjunction with the inflation, so you receive more than the hit of the prices.

GMWB (Guaranteed Minimum Withdrawal Benefit)

This annuity is also called the variable annuity. This annuity gives you a minimum amount regardless of the conditions persisting in the market. You can also benefit from the time when the market is spooling in excellent returns and it can also be a risk in terms of poorer returns.

If you take up a GMWB, you will get higher initial payments and high fees, while the other options will provide you with lower starting annuity payments.

What Amount Will You Receive for Annuity?

The following factors are considered to count the amount of annuity that will be credited towards you.

  • Gender
  • Age (Also of a spouse in case of joint life)
  • Life expectancy
  • Health condition
  • Interest rate
  • Investment sum
  • The alternative, survivor annuity, guaranteed term, etc.

Age and gender factors are more connected with life expectancy. This tends to be lower for men as compared to women. In 2017, the life expectancy of the male population in Canada was 79 years and 83 for females. The amount of annuity payment is directly proportional to your age. Hence, if you purchase it at a more old age, your annuity payment will also be higher because of lower life expectancy. 

Read Government Benefits Available For Seniors In Canada!

Is Annuity Planning in Canada Good for You?

To define the prolificacy of annuity planning in Canada, you need to consider the following factors


An annuity does not give you the liberty to change your mind once you’ve bought it. You cannot alter the terms, withdrawal, or close your account without dodging big penalties. If you prefer to have more flexibility to choose your terms and have more control over different factors in your investment, RRIF is the more ideal pick.

Provides Peace

Annuities can save you from a loss of hassle and unwanted poignancy by providing a long-term income with assurance. You don’t have to worry about market volatility, market crashes, or outliving your income. Life annuities provide assurance against terms and inflation. 

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Estate Protection

RRIF is easy to wind up as you can transfer them with ease to the spouse or include them in the estate of the deceased. These payments are made to spouses only if you have a fixed joint annuity option or have a guarantee period option. 

Health and Life Expectancy 

Life is uncertain and so is death. However, if you are diagnosed with a serious condition like diabetes, cancer, stroke, that brings your life expectancy down. You have the option for an impaired annuity if you have a high income.

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Guarantees and Pay

An annuity has lower fees to choose from. It all comes down to the type of annuity that you decide to go for. You will pay a high fee if you choose the GMWB.

Final Thought

Having different alternatives for anything is more assuring. After closing your RRSP, you can buy an annuity or an RRIF or withdraw cash. Retirement planning is essential and should always be done meticulously. You should consult a financial advisor for this, and make sure you look around for the best rates. Implementing good investment practices can lead you to get amazing returns as you grow old. So, use that to your advantage! 

Read: A Comprehensive List of Best Robo Advisors in Canada!

Devanshee Dave

Devanshee is a staff writer at She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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