Update to the maturity process for the Sun Life Granite 2020 Funds
Plan sponsors may wish to consider whether this investment news has any implications for the investment options available within their plans. Sun Life Assurance Company of Canada purchases units of the funds listed below, which are established as segregated funds in accordance with the Insurance Companies Act (Canada).
Sun Life Global Investments (SLGI) has announced an update to the maturity process for the Sun Life Granite® 2020 Target Date and Multi-Risk Target Date Segregated Funds (“Granite 2020 Funds”). Here is a list of the impacted funds:
- Sun Life Granite 2020
- Sun Life Granite 2020 Conservative
- Sun Life Granite 2020 Moderate
- Sun Life Granite 2020 Aggressive
What happens when the Granite 2020 Fund reaches its year of maturity?
In general, when a Granite fund reaches the year identified in its name, it will have reached its most conservative investment mix. This investment mix seeks to provide income and moderate long-term growth of capital for investors beginning to withdraw their money. At some point, SLGI will automatically merge the maturing Granite fund into the Sun Life Granite Retirement Fund (“Granite Retirement Fund”).
The Granite 2020 Funds’ asset mix will stop evolving and will become identical to the Granite Retirement Fund in June 2020. At that time, plan sponsors will no longer be able to add the Granite 2020 Funds to their line-ups.
After June 22, 2020, no member contributions will go into the Granite 2020 Funds. Sun Life will redirect all future member contributions in the Granite 2020 Funds (whether defaulted or actively selected) to the Granite Retirement Fund.
The Granite 2020 Funds will close and merge into the Granite Retirement Fund in June 2024.
Why will SLGI wait 4 years between the maturity of the Granite 2020 Funds and their merger into the Granite Retirement Fund?
SLGI opted to give plan members with money in the Granite 2020 Funds more flexibility/time for tax planning purposes. It’s particularly important for investors who hold the fund in a non-registered plan as the merger of a maturing target date fund into the Retirement Fund currently constitutes a taxable event in Canada.
Summary of timeline of Granite 2020 Funds maturity
We’ll be closing the Granite 2020 Funds to new members in June 2020. At that time:
- The Granite 2020 Funds will no longer be available for addition to plan sponsor line-ups.
- The Granite 2020 Funds will no longer be available as a default fund.
- The Granite 2020 Funds will no longer receive new money (i.e. contributions or transfers-in).
- We’ll redirect members’ contribution instructions for the Granite 2020 Funds to the Granite Retirement Fund.
Plan members can keep their money in the Granite 2020 Funds until June 2024. They will then merge into the Granite Retirement Fund. Alternatively, plan members can move their money in the Granite 2020 Funds to the Granite Retirement Fund (or any other Granite fund that fits their needs) any time before June 2024.
Plan members with money in the Granite 2020 Funds that are part of non-registered plans will likely experience a capital gain or loss when the money is transferred to the Granite Retirement Fund. The members must report capital gains or losses, if any, on their tax return in the year their assets are moved. Plan members can use capital losses to offset capital gains realized from other income during the year, capital gains reported in the last three years, or reduce future capital gains.
There are no tax implications for money held in registered plans.
We’ll post a message outlining the changes and potential tax impacts on mySunLife.ca.
About the Granite Target Date fund series
The Granite and Granite Multi-Risk Target Date funds series use a multi-manager structure to create a balanced asset mix. SLGI invests assets in both active and passive funds across various asset classes, investment styles and geographic regions. SLGI manages the asset mix tactically to take advantage of changing market conditions. The Granite Funds provide exposure to the following asset classes:
- Canadian equities
- U.S. equities
- International equities (developed and emerging markets)
- Fixed income (domestic and foreign including emerging markets debt)
- Real Estate Investment Trusts (REIT)
- Specialty equity and fixed income (private fixed income, high yield bonds, global natural resources)
- Cash and equivalents
The series is available with target maturity dates in 5-year intervals (Retirement, 2020, 2025, 2030, 2035, 2040, 2045, 2050, 2055 and 2060). Members select the target date fund that most closely aligns with the year when they wish to retire. Each fund gets more conservative as it moves closer to its maturity. At maturity, each fund moves into the Retirement fund.
About the Granite Retirement Fund
The Granite Retirement Fund targets people currently near or in retirement. As such, it seeks income and moderate long-term growth of capital. It holds a blend of investments that investors may find appropriate for retirement years. It invests approximately 35% of its assets in stocks and around 65% in bonds.
The Granite Retirement Fund is the most conservative fund in the Granite series of target date funds. It’s also the only Granite Fund that maintains a near-consistent investment mix over time.
How will this impact you and your plan members?
You or your plan members do not need to take any action at this time.
Plan members with money invested in the Granite 2020 Funds as part of a non-registered plan should consider the tax impact the merger may have on their particular situation.
Closer to the merger date, we’ll provide you and your plan members with further information as to any possible tax and other consequences that may occur as a result of the fund merger.
Please contact your Sun Life Group Retirement Services representative.