The Basics
What is an Annuity?
A simple, guaranteed retirement income product — convert your savings into a personal pension.
Your Options
Two Types of Annuities
Choose the option that best fits your retirement income goals and timeline.
Why Choose an Annuity
Key Benefits at a Glance
Annuities offer a unique combination of security, simplicity, and tax efficiency that few other retirement products can match.
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No Market RiskYour income is set the day you purchase. Market ups and downs have zero impact on what you receive. |
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You Can’t Outlive ItA life annuity pays you for as long as you live — even if you live to 100 or beyond. |
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Inflation Protection OptionChoose an annual income increase of up to 4–6% to help your payments keep pace with the cost of living. |
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Creditor ProtectionBy naming a beneficiary, your annuity income may be protected from creditors under certain conditions. |
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Estate Planning AdvantagesNaming a beneficiary allows wealth to transfer privately, potentially bypassing the probate process. |
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Assuris ProtectionCanadian annuities are backed by Assuris, the not-for-profit organization that protects policyholders if an insurer fails. |
Side-by-Side Comparison
Life Annuity vs. Term Certain Annuity
Not sure which type is right for you? Here’s a clear comparison of the two options.
| Feature | Life Annuity | Term Certain Annuity |
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| Income Duration | For life (cannot outlive it) | 3 to 25 years of your choice |
| Joint Coverage | Yes — Joint Life option available | No joint option |
| Death Benefit | Remaining guaranteed payments to beneficiary | Remaining payments paid to beneficiary |
| Inflation Indexing | 0–6% annual increase (non-reg); 0–4% (reg) | 0–6% annual increase (non-reg); 0–4% (reg) |
| Registered Funds | RRSP, LIRA, RRIF, LIF, RPP, DPSP | RRSP and RRIF only |
| Non-Registered Funds | ✓ Yes | ✓ Yes |
| Minimum Premium | $10,000 | $10,000 |
| Issue Ages | Age 18–80 | Non-reg: 18–80 / Registered: 65–80 |
| Payment Frequency | Monthly, quarterly, semi-annual, annual | Monthly, quarterly, semi-annual, annual |
| Best For | Retirement income floor, longevity protection | Bridging income gaps, structured gifts, education funding |
Real-Life Scenarios
Who Benefits from an Annuity?
Annuities are not just for retirees. Here are three common situations where an annuity makes excellent sense.
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Scenario 1 The Retiree Who Wants CertaintyMargaret, 67, has $300,000 in her RRIF. She’s worried about market volatility and running out of money. She converts a portion into a life annuity, guaranteeing $1,400/month for life — no matter what the market does. |
Scenario 2 The Pre-Retiree Bridging to CPPDavid, 60, retires early but wants to delay CPP to age 70 to maximize his benefit. He purchases a 10-year term certain annuity to bridge the income gap, receiving steady monthly payments until his CPP kicks in. |
Scenario 3 The Parent Supporting a University StudentSarah and Tom purchase a 4-year term certain annuity to fund their daughter’s undergraduate degree. Instead of handing over a lump sum, their daughter receives a fixed monthly income — learning to budget while being supported. |
Tax Considerations
How Are Annuity Payments Taxed?
The tax treatment of your annuity income depends on whether you use registered or non-registered funds to purchase it.
Registered Annuities (RRSP, RRIF, LIRA, etc.)All annuity income paid out in a calendar year is fully taxable to the owner in the year the payment is received — similar to RRIF withdrawals. Eligible registered sources include:
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Non-Registered AnnuitiesPurchased with after-tax money. The capital portion of each payment is not taxable — only the interest earned is taxed. Two tax treatment options:
A financial advisor can help determine which option minimizes your overall tax burden. |
Common Questions
Frequently Asked Questions
Answers to the most common questions Canadians have about annuities.
Can I get my money back if I change my mind?
Annuities are generally non-commutable, meaning they cannot be surrendered for a lump sum after purchase. This is what makes the guaranteed income possible. It is important to carefully consider your decision before purchasing — your advisor can help you determine the right amount to annuitize versus keeping in flexible investments.
What happens to my annuity when I die?
If you chose a guaranteed payment period and pass away before it ends, your named beneficiary receives the remaining guaranteed payments — either as a lump sum or as scheduled payments. For joint life annuities, income continues for the surviving spouse.
What is the minimum amount I need to purchase an annuity?
The minimum single premium is $10,000. The maximum for non-registered life annuities is $500,000, and for registered annuities it is $1,000,000. Term certain annuities have a maximum of $2,000,000.
Is my annuity protected if the insurance company fails?
Yes. Canadian annuities are protected by Assuris, a not-for-profit organization that protects Canadian policyholders in the event their life insurance company becomes insolvent. Details are available at assuris.ca.
Can I add inflation protection to my annuity?
Yes. You can choose an annual indexation rate to help offset inflation. For non-registered annuities, the rate can be 0–6% per year. For registered annuities, the rate can be 0–4% per year. Note that choosing indexation means your starting income will be lower, but it will grow over time.
How are annuity payments delivered?
Payments are delivered via direct deposit (EFT) for monthly, quarterly, and semi-annual frequencies. Annual payments can be made by direct deposit or cheque.
Ready to Secure Your Guaranteed Income?
Our advisors at Safe Haven Financial will help you determine how much of your retirement savings to convert into guaranteed income — and which annuity type best fits your goals.
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