In this article, Paul K. Fryer discusses the 3 main sources of retirement income and the importance of adding savings to pensions.

When discussing retirement with clients, consider three pillars supporting a solid retirement income plan: government pensions, workplace pensions, and retirement savings.

The maximum payout for the Canada Pension Plan (CPP) in 2015 was only $12,780 per year – not a huge amount. But the original idea behind the CPP was that an individual would also need employer pensions and private savings to generate enough income for a comfortable retirement.

Remind clients with a workplace pension that they can potentially increase their retirement income in the future by making sure they don’t leave money on the table now.

Sun Life Financial research estimates Canadians are missing out on more than $3 billion per year of “free money,” because employees don’t take full advantage of corporate pension and savings plans and their contribution-matching programs. Ask your clients if their employers match dollar for dollar or 50 cents on the dollar for the contributions they put in, and if they do, show them how that extra money will grow.

To make the most of retirement savings, encourage clients to adopt the number one piece of advice that retirees gave in a recent survey: start saving and investing early.1

Savings are an increasingly important pillar of retirement income plans, especially since Canadians are living longer, with retirement spanning 20 or 30 years, or even more. If any of your clients are missing a pillar — only 2 out of 5 Canadians are covered by a workplace pension plan2 — it’s even more essential to complement government pensions with savings they can convert into guaranteed retirement income for as long as they live.

The DIY solution

To encourage clients to increase guaranteed income for life in their retirement plans, explain new approaches to products such as segregated funds. Also called guaranteed investment funds (GIFs), they can serve as a do-it-yourself (DIY) pension investment, giving clients protection, flexibility and guarantees.

Start a conversation about how a product such as Sun Lifetime Advantage GIF has many of the positive attributes of both defined benefit (DB) and defined contribution (DC) pension plans. Similar to a DB pension plan, clients will collect lifetime guaranteed income, and similar to a DC plan, they can choose their own funds to suit their risk tolerance.

Choice and flexibility

Canadians who need to build a DIY pension or want to complement other sources of retirement income can look to these benefits in Sun Life GIFs income products:

  • a set minimum income guaranteed for life,
  • deferral benefits:
    • for every year clients defer starting their income, their guaranteed income will increase,
    • automatic annual resets lock in positive market performance and rising interest rates,
  • insurance contract benefits including maturity and death benefit guarantees, named beneficiaries, and potential creditor protection,
  • a legacy settlement option, and
  • flexibility for clients to start taking income, when they’re ready and really want to start receiving it.

Sun GIF Solutions can protect clients’ savings, take advantage of strong market performance, lock in lifetime guaranteed income, and create a meaningful legacy. From the perspective of a DIY pension, the Income Series option offers the following benefits:

  • High level of lifetime guaranteed income – gives clients peace of mind, certain they’ll receive guaranteed income for life.
  • Deferral option – clients can lock in future retirement income, based on the current market value and current interest rates. They’re guaranteed a lifetime income that’s increased for every year they defer starting income.
  • Ease of transition to retirement income – clients can take care of their changing needs, with a convenient process to begin receiving income, when they’re ready.

The 3 pillars of Canada’s pension system — government pensions [Canada/Quebec Pension Plan (CPP/QPP), Old Age Security (OAS)], a workplace pension and savings plan (if they have one), and personal savings — can provide enough income for retirement.

Will any changes to government pension plans provide more income for clients? The federal 2016 budget offers no hints about what Prime Minister Justin Trudeau’s government has in store for the CPP. It repeats the Federal Liberals’ commitment to enhancing the CPP, but doesn’t offer details about how much it could be expanded, at what cost, and when. We’ll have to wait and see the results of their public consultations on how to improve the program. Many options have been tabled over the past several years. We’ll also be keeping a close eye on the Ontario Retirement Pension Plan (ORPP), set to launch at the start of 2017. Many details have yet to be disclosed.

In the meantime, talk with your clients today to put them on a path toward lifetime guaranteed retirement income.

Go to the Sun Life GIFs advisor website for product information, fund performance, tools and other resources.

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1 89% of mid-market retirees surveyed ranked starting to save and invest early as the number one retirement tip, Sun Life Retirement Now Report, 2016.

2 Pension plans in Canada as of January 1, 2014, Statistics Canada.


Paul K. Fryer is Vice-President, Individual Business Management, with Sun Life Financial. Paul graduated from the University of Waterloo with an honours B Math in 1989 and obtained his actuarial designations (FSA, FCIA) in 1992. Since joining Mutual Life in 1989, Paul has had a broad set of experiences within Mutual Life, Clarica, and Sun Life Financial, including roles in Individual Insurance and Investments, Group Benefits, Group Retirement Services, Corporate Risk Management, Demutualization, and Strategic Acquisitions. His current responsibilities include product development, pricing, and product management for Sun Life Financial’s Canadian Individual Life Insurance, Health Insurance, and Annuity/GIC products. Paul has served on a variety of Canadian Life and Health Insurance Association and Canadian Institute of Actuaries Committees/Task Forces.