Most Canadians surveyed want a combination of guaranteed lifetime income (GLI) and income from pension/government plans. That’s according to a joint survey conducted by CANNEX Financial Exchanges Limited and Greenwald & Associates.1
But there’s still a big gap between what most Canadians want — and what they know:
- 4 out of 5 Canadians believe it’s valuable to have GLI, in addition to government plans.
- Only 1 out of 2 (48%) Canadians is familiar with income annuities, and only 26% are familiar with segregated fund products.
“This gap in interest and awareness represents a significant opportunity for both Canadian financial institutions and advisors, as consumers move into retirement,” said Doug Kincaid, Senior Research Associate at Greenwald & Associates. “GLI products significantly improve the retirement income planning process by reducing the longevity risk component, but consumers don’t seem to be aware of this benefit.”
Most surveyed admit they’re unfamiliar with the product options available that will give them lifetime guaranteed income and haven’t discussed these products with an advisor.
The survey also found that consumers’ number one concern in retirement is having enough money to live comfortably throughout retirement. They believe GLI products2 provide peace of mind and make it easier to budget and plan monthly expenditures.
Participants in the survey were 55- to 75-year-old Canadians having investable assets of $100,000 or more.
EASE ANXIETY AND EDUCATE
Study highlights reveal the comforting effect of GLI, as well as concerns about having sufficient retirement income and market volatility:
- Almost 2 out of 3 retired Canadians say having guaranteed income is a source of happiness.
- 40% of Canadians are concerned about having enough to live comfortably in retirement.
- 39% of Canadians are concerned about the possibility of losing some of their retirement savings due to stock market downturns.
2 of the best solutions to achieve GLI — payout annuities and segregated fund contracts with an income guarantee — aren’t in many Canadians’ retirement plans. And although segregated funds have been on the market for many years, not many survey respondents are familiar with them:
- Only 16% of Canadians expect to receive income in retirement from annuities and only 10% from segregated funds.
- Only 26% of Canadians are familiar with segregated fund products, but 83% are familiar with mutual funds.
“What a great opportunity for you to talk to your clients about retirement planning,” said Rocco Taglioni, Senior Vice-President, Distribution and Marketing, Individual Insurance and Wealth, Sun Life Financial. “As a good place to start, you could suggest they allocate a portion of their retirement savings to life annuity and segregated fund products providing guaranteed lifetime income.”
Discover basic expenses required at retirement and subtract the expected CPP/QPP, OAS and defined benefit pension plans (DB) amounts. “That will help you calculate how much income your clients will need from the guaranteed products to cover their basic needs,” he said.
Talk with your clients and educate them about guaranteed sources of retirement income. It’ll give them money for the rest of their lives — some highly valuable peace of mind.
RESOURCES TO START AND CONTINUE THE CONVERSATION
- Learn more about Sun Life GIFs at sunlifegifs.ca/advisor.
- Go to Payout annuities to run an illustration, access an application form, guides, brochures, and more.
- Sign in to sunlife.ca/advisor and go to the Money for Life web app to access the following four tools; use these four digital resources, exclusively from Sun Life Financial, to help your clients plan for their retirement with GLI:
- Annuity and GIC income comparison tool – show your clients their potential retirement income. Enter information specific to your clients’ situations — such as premium source, annual income, tax rate and interest rate — for customized results.
- Buy now, buy later tool – help clients between the ages of 65 and 75 understand the best time to buy a life annuity to meet their retirement goals, as well as the risks of delaying a life annuity purchase.
- Sustainable income demo – start a retirement income discussion with this simple graph showing how a life annuity can increase the income your clients will receive — and emphasizing that annuity income will last a lifetime.
- Longevity risk illustrator tool – your clients may be underestimating how long they’ll likely live and not preparing for a longer retirement. This interactive tool reveals the probability that your clients will live into their nineties. It also provides customized info about the changes to health that come with longer lives.
ABOUT THE SURVEY
Sun Life Financial, Great-West Life, Canada Life, and London Life sponsored the survey. Results include the top 3 box scores of 1,015 participants. CANNEX and Greenwald & Associates conducted a U.S. version of the survey in 2014 and found similar results overall.
1 CANNEX Financial Exchanges Limited is an independent provider of data and information to the financial service industries in Canada and the United States. Greenwald & Associates is a leading financial services market research firm. All findings in this article are from the Canadian Guaranteed Lifetime Income Study, conducted in August 2015 and distributed on September 25, 2015.
2 GLI products referenced in the study include income annuities and segregated investment funds with guaranteed minimum withdrawal benefits (GMWB).