Superflex

Target client profiles: Superflex can help balance your clients need for security and rate of return, to provide them with reliable growth while keeping it safe from volatile markets.

Selling features: When held as a registered retirement savings plan (RRSP), Superflex can easily be converted into a registered retirement income fund (RRIF) to generate a steady stream of retirement income. Because it is an accumulation annuity offered by an insurance company, your clients can bypass probate by naming a beneficiary - on all the registration types we offer – Non Registered, TFSA and RRSP.

Overview

Product features
  • Superflex is available for the following registration types:
    • Non-registered
    • Tax-Free Savings Account (TFSA)
    • Registered Retirement Savings Plan (RRSP)
    • Locked-in retirement account (LIRA)
    • Locked-in RRSP.
  • Available interest plans:
    • Compound
    • Annual
    • Monthly interest payout
    • Annual interest payout
  • A daily interest investment is available.
    • Minimum amount $250 or $50 ($25 for juveniles) pre-authorized chequing (PAC).
  • Guaranteed interest investments
    • Available terms are 1 to 10 years.
    • Minimum investment is $1,000.
    • Auto Ladder investment option available
  • Interest rates are guaranteed for 45 days.
  • Rates will be interpolated for client-selected end dates.
  • There are no up-front or annual fees. All money earns interest immediately.
  • Only one annuitant is permitted.
  • Successor annuitant option is available on non-registered policies.
  • Joint owner plans can include a contingent policyholder appointment.
  • With proper beneficiary designation, money may be exempt from seizure by creditors.
  • Protection offered through Assuris
SunGIC Max, GIC and Superflex/Income Master - Comparison

Interest and investments

Interest types

There are 3 interest types available.

Superflex accumulation annuity (Insurance GIC*):
All interest types are available and can all be selected within the same product, unlike the GIC products described below.
GIC products (Trust GICs):
Each investment within a contract must have the same interest type. If a client wishes to reinvest a maturing investment to an investment with a different interest type (i.e. compound interest to annual interest), a new GIC will be required with a new application completed. Instructions will also be required to transfer the money from the existing GIC to the new GIC.

Regardless of the interest type selected, each product offers:

  • a daily interest investment.
  • guaranteed interest investments (minimum investment $1,000).
Interest types
1.  Compound interest
  • After interest is added to the investment each day, the combined sum continues to earn the same rate as the original principal for the duration of the guaranteed investment.
  • Interest is quoted on an effective annual basis.
  • Interest rates are expressed as a rate per year compounded annually.
2.  Monthly interest - not available for RRIF
  • Interest is calculated and added to the value of each guaranteed interest investment daily.
  • The amount of interest earned each month will equal 1/12th the annual interest. The annual interest equals the principal multiplied by the applicable interest rate.
  • For the GIC products, interest from a guaranteed investment rolls to the daily interest investment automatically on each monthly anniversary date of the individual investment.
  • If the client chooses to withdraw the interest on a monthly basis, electronic funds transfer (EFT) will be used to transfer the amount to the client's bank account.
  • For the Superflex accumulation annuity, monthly interest must be paid out each month to the client via EFT.
3.  Annual interest - not available for RRIF
  • Interest is calculated and added to the value of each guaranteed interest investment daily.
  • Interest is quoted on an effective annual basis.
  • Interest from a guaranteed investment rolls to the daily interest investment automatically on each annual anniversary date of the individual investment.
  • For the Superflex accumulation annuity:
    • The final year of interest will automatically roll with the principal amount to a new investment with the same term. (unless alternate directions are received for maturity action)
    • Alternatively an annual interest payout investment can be selected where the annual interest (including the final year) will be paid out to the client each year.
  • If the client chooses to withdraw the interest on an annual basis, there are 2 payment options; cheque or EFT.
When guaranteed interest investments end
  • For GIC products with terms of greater than a year, interest and principal from a guaranteed investment roll to the daily interest investment automatically. Investment instructions are required if a subsequent investment or withdrawal is required.
  • Superflex accumulation annuity investments and investments with terms of less than 1 year (which are only available within a GIC product) automatically roll to the same term. Requests to reinvest differently or withdraw must be received prior to maturity.

* This product is an accumulation annuity issued by Sun Life Assurance Company of Canada.

Contributions

This document provides information about contributions to Registered Retirement Savings Plans (RRSPs). Products affected are Guaranteed Investment Certificates (GIC), Superflex, and segregated funds.

The RRSP dollar limit

A taxpayer’s RRSP dollar limit is identified on the Notice of assessment or Notice of reassessment produced by the Canada Revenue Agency (CRA). This is referred to as the RRSP contribution room. You can view RRSP limits on the CRA website.

The unused RRSP contribution room

The unused RRSP contribution room measures the amount of RRSP contribution that can be carried forward for future years. It is used for three purposes:

  1. The unused RRSP contribution room determines the amount of RRSP contribution that may be made and deducted in a year allowing a taxpayer to defer the contribution made to their RRSPs. This is the carry forward function.
  2. The unused RRSP contribution room limits the improvements that may be made to the past service benefits of a taxpayer under a Registered Pension Plan (RPP). The RRSP contribution room allows a person to integrate benefits provided under RPPs with contributions to RRSPs. The taxpayer must ensure that their total tax-assisted saving does not exceed the overall allowable limits.
  3. The unused RRSP contribution room is used to determine if a taxpayer has over-contributed to their RRSPs.

To determine the amount of the unused RRSP contribution room, Pension Adjustment (PA) and Past Service Pension Adjustment (PSPA) have to be taken into consideration.

The formula to calculate the unused RRSP contribution room is calculated at the end of a year as:

  1. the unused RRSP contribution room at the end of the preceding tax year plus
  2. the lesser of the RRSP dollar limits for the year and 18% of earned income for the previous year minus
  3. all PAs for the previous year, the net PSPA and RRSP contributions deducted in the year.

While a taxpayer's unused RRSP contribution room will normally be positive or zero, it can also be negative meaning they may have over-contributed.

  • A negative amount may also result where an improvement to the taxpayer's past service benefits under an RPP results in a PSPA that is greater than the available contribution room.
  • A taxpayer is permitted to over-contribute to their RRSP for a lifetime amount of $2,000.00 (but this limit is increased to $8,000.00 if the over contribution was prior to February 27, 1995).
Example 1: No carry-forward of unused RRSP contribution room

Let's track an example through 2015 and 2016 and assume a taxpayer has earned income of $150,000. The 2015 RRSP dollar limit was $24,930 and the 2016 RRSP dollar limit was $25,370.00.

  • He is not a member of an RPP or Deferred Profit Sharing Plan (DPSP), therefore, no PA or PSPA.
  • He makes the maximum contribution each year.
  • The unused deduction room at the end of 2015 is as follows:
The unused contribution at the end of 2014

0.00

+ The lesser of RRSP limit and 18% of previous year (2014) earned income

+$24,930

- RRSP contribution deducted in 2015

-$24,930

Unused contribution room in 2015

0.00

  • The unused contribution room at the end of 2016 is as follows:
The unused contribution room at the end of 2015

0.00

+ The lesser of RRSP limit and 18% of earned income

+$25,370

- RRSP contribution deducted in 2016

-$25,370

Unused contribution room in 2016

0.00

Example 2: Carry forward of unused RRSP contribution room

Let's track another example through 2015 and 2016.

  • Assume a taxpayer has earned income of $150,000.
  • He is not a member of an RPP or DPSP, therefore, has no PA or PSPA.
  • He did not make contribution in 2015 therefore he can carry forward unused RRSP contribution room.
  • The unused contribution room at the end of 2015 is as follows:
The unused contribution room at the end of 2014

$0.00

+ the lesser of RRSP limit and 18% of earned income

+$24,930

- RRSP contribution deducted in 2015

-$0.00

Unused contribution room in 2015

$24,930

  • The unused contribution room at the end of 2016 is as follows:
The unused contribution room at the end of 2015

$24,930

+ The lesser of RRSP limit and 18% of earned income

+$25,370

- RRSP contribution deducted in 2016

-$25,370

Unused contribution room in 2016

$24,930

Deductible contribution

The contributor of an RRSP may deduct the lesser of:

  1. all contributions paid on or before the day that is 60 days after the end of the year; and
  2. his RRSP deduction limit for the year.
Client-selected end dates

Client-selected end dates (CSED), available on all Sun Life guaranteed interest products available for sale, allow clients to select the end dates on their guaranteed interest investments. Having this option increases our competitiveness by spreading out both the workload and flow of funds to invest. This, in turn, helps you attract more clients and retain the ones you have. It can also spread your workload throughout the year.

Client-selected end dates give clients flexibility and control over their money by allowing them to:

  • plan future guaranteed interest investments to roll over at the same time as existing investments, so they can take advantage of large case rate enhancements.
  • choose an end date that suits their needs (planning for an upcoming large purchase, a vacation etc.).
  • choose any length of investment as follows:
    • GICs - between 30 days and 5 years
    • RRIF registrations - between 1 and 25 years
    • Superflex annuity - between 1 and 10 years

Interest rates will be interpolated. Interpolation is calculated to the nearest .01%.

The formula for interpolation is RATE = R1 + (#days/365) x (R2-R1) where:

  • R1 = rate for the next lowest even year
  • R2 = rate for the next highest even year
  • #days = number of days into the non-even year
Investment options

There are 3 types of investment options available to your clients:

  • Daily interest investment
  • Guaranteed interest investments
  • Auto ladder
Daily interest investment
Interest
  • The interest rate can fluctuate daily.
  • Interest begins when we receive the application and the money.
  • Interest is calculated and credited daily to the balance of the investment.

Note: Rate enhancement levels do not apply to daily interest.

Advantages
  • Money can be deposited or withdrawn at any time.
  • The money is accessible with no market value adjustment (MVA).
  • Deposits can be made by:
  • Pre-authorized chequing (PAC) (not available on GIC products),
  • cheque,
  • external transfer, or
  • any combination of these.
  • Once $1,000 has accumulated in the daily interest investment, a client may choose to transfer the money into a guaranteed interest investment.
  • Minimum investments for daily interest investment If PAC is set up, the minimum PAC amount is $50 per month.
  • If PAC is not set up, the minimum amount required to open a Superflex accumulation annuity or GIC product is $250.
  • The minimum required to open a guaranteed interest product with RIF registration is $5000.

Note: The minimum opening investment should always be paid with application except in the case of an external transfer.

Guaranteed interest investments
  • The interest rate is guaranteed for a specific term.
  • The minimum amount required to establish a guaranteed interest investment is $1,000.
  • Interest is calculated from the date the guaranteed interest investment is established.
Advantages

The client can have several guaranteed interest investments all within the same plan. With the exception of GICs with RIF registration a client can have an unlimited amount of investments in one contract - in any or all of the terms available. GIC RRIFs are limited to 5 investments.

Note: GIC products only allow one interest type per plan (i.e. all compound or all annual interest).

The interest rate is guaranteed for any period between:

  • 1 and 5 years for GIC products (short term investments, less than 1 year, are also available on GIC products)
  • 1 and 10 years for Superflex accumulation annuity
  • 1 and 25 years for all products with RIF registration

This means the client can select:

  • a certain term or (e.g. 19 months, 3 years, etc.)
  • If a certain term is selected, the investment will mature at the end of the selected number of years/months.
  • a specific end date (e.g. October 15, 2016, July 20, 2017, etc.)
  • If a specific end date is selected, the investment will mature on that specific date.

With the exception of the Sun GIC Max, money can be withdrawn before the end of a guaranteed interest investment, but may have a market value adjustment (MVA).

At the end of the Superflex/Income Master accumulation annuity or GIC/Sun GIC Max guaranteed interest investment term, the client can:

  • withdraw their money,
  • reinvest their money in a new guaranteed interest investment at the then current interest rate for the selected term,
  • leave their money in the daily interest investment.

If the client has their money in the following, the money automatically reinvests based on the posted rate available for that product for the same term, unless investment instructions are provided before the investment matures:

  • Guaranteed Investment Certificate (GIC) for a short term investment (i.e. 30 days - 270 days),
  • Sun GIC Max for short term investment (i.e. 30 days - 270 days),
  • Superflex/Income Master annuity.

If the client has their money in the following, we credit the money to the daily interest investment at maturity, unless investment instructions are provided before the investment matures:

  • long-term Sun GIC Max
  • long-term Guaranteed Investment Certificate (GIC)

Note: Prior to maturity, notices will be mailed to clients and maturity instructions can be provided up to 45 days before the investment matures.

Auto ladder (Superflex/Income Master only)
  • The interest rate is guaranteed for each specific term.
  • The minimum amount required to establish an auto ladder is $5,000.
  • The investment is split equally between each of the 1 to 5 year guaranteed interest investment terms.
  • Interest is calculated from the date the auto ladder is established.
  • The client will have 5 guaranteed interest investments all within the same plan.
  • As each guaranteed interest investment term matures, the balance will be automatically invested in a new 5-year guaranteed interest investment at the then current posted interest rate.
  • A confirmation notice will automatically be sent out when the new guaranteed interest investment has been made.

More information

Rate commitments
Interpolated rates for guaranteed interest products

We "interpolate" interest rates for investment terms that lie between whole years. This interpolation will be calculated to the nearest .01%.

The formula for the interpolation is RATE = R1 + (#days/365) x (R2-R1) where:

  • R1 = rate for the next lowest even year
  • R2 = rate for the next highest even year
  • #days = number of days into the non-even year

e.g. If the 2-year rate is 5% and 3-year rate is 6%, then the rate for 2 years and 8 days (time between start date and end date) is: 5% + (8/365) x (6% - 5%) = 5.021918% so that client would receive 5.02%.

Note: For short-term GIC products, #days/365 in the above formula becomes the #days beyond the lower term for which a rate is stated divided by the number of days between the lower and higher terms (e.g. for a 35-day rate, use (35-30)/(60-30)).

The method of determining the start date remains unchanged:

  • with fund commitment - date of commitment
  • without fund commitment - date funds and/or forms are received at head office

General information

Required minimums
Superflex accumulation annuity (Insurance GIC)
  • $1,000 for guaranteed investments (compound and annual interest)
  • $5,000 for annual and monthly interest payout guaranteed investments
  • $250 for daily interest investment
  • Pre-authorized chequing (PAC) available into daily interest - $50 monthly (not available on LIRA or locked-in RRSP)
  • Income master RRIF
    • Initial policy minimum $5,000
    • No pre-authorized chequing (PAC)
    • Payment minimum - If the full amount of the legislated minimum has not been met, the balance will be paid out December 31 each year
Minimum age requirement to purchase accumulation annuities (Insurance GIC)
  • RRSP /RRIF/TFSA: age 18
  • Non-registered: age 16 (in Quebec, age 18)
Sun GIC Max (Trust GIC, non-redeemable) / Guaranteed Investment Certificate (Trust GIC, redeemable)
  • $1,000 for guaranteed investments
  • $250 for daily interest investment
  • No pre-authorized chequing (PAC)
  • Short term investments are available (< 1 yr)
  • RRIF registration
    • Initial policy minimum $5,000
    • Payment minimum - If the full amount of the legislated minimum has not been met, the balance will be paid out December 31 each year
Minimum age requirements to purchase Sun Life Trust GIC products (all registration types)
Province Age (years)

British Columbia

19

Alberta

18

Saskatchewan

18

Manitoba

18

Ontario

18

Quebec

18

New Brunswick

19

Prince Edward Island

18

Nova Scotia

19

Newfoundland and Labrador

19

Yukon Territory

19

Northwest Territory

19

Nunavut

19

Joint ownerships and annuitants
Jointly-owned Superflex accumulation annuities (applicable to new contracts issued December 2009 and forward)
  • Upon the death of an owner who is not the last surviving annuitant, the other joint owner will be considered to be the contingent owner (in Quebec, subrogated policyholder) of the deceased owner’s share of the contract, unless otherwise stated on the application.
  • A successor annuitant can be named. If a successor annuitant is named and is alive upon the death of the annuitant, the contract will continue after the death of the annuitant and no death benefit will be payable.
Important points to remember on jointly-owned accumulation annuities (Superflex):
  • Joint ownership is only permitted on non-registered policies.
  • Accumulation annuities require that an annuitant be named.
  • Laws that apply are the Insurance Acts in common-law provinces and the Civil Code in Quebec.
  • A contingent owner should be named for each owner.
Information: What happens at death?
If the annuitant dies and no successor annuitant has been named:
  • The policy terminates – regardless of who the owner is.
  • The surviving joint owner(s) does/do not take over ownership of this policy and is/are not entitled to the death claim proceeds (unless they are also the named beneficiary, or no beneficiary has been named). The named beneficiary(ies) receive the death claim proceeds.
If the annuitant dies and a successor annuitant has been named:
  • If the annuitant is one of the joint owners, his or her share of the ownership will be transferred to the contingent owner for that share (or his or her estate if no contingent owner has been named) and the successor annuitant will become the annuitant.
  • New owner(s) can update successor annuitant and contingent owner and beneficiary if desired.
  • If the annuitant is not one of the joint owners, owners will remain unchanged and the successor annuitant will become the annuitant.
  • No death benefit is payable.
If the joint owner dies (and that joint owner is not the annuitant of the policy):
  • If a contingent owner who is the surviving joint owner has been named, the deceased joint owner's share of the policy would pass automatically to the surviving joint owner, resulting in the policy being owned 100% by the surviving owner.
  • If a contingent owner who was not one of the joint owners had been named, the deceased joint owner's share of the policy would pass automatically to the contingent owner, resulting in the policy being 50% owned by the surviving joint owner and 50% owned by the former contingent owner. (The owners may wish to appoint new contingent owners at this time.)
  • If no contingent owner has been named, the other joint owner will be considered to be the contingent owner (in Quebec, subrogated policyholder) of the deceased owner’s share of the contract, unless otherwise specified.
Please view this chart
for different scenarios that may apply to your client.
Jointly-owned Sun GIC Max or Guaranteed Investment Certificates (GICs)
Important points to remember on jointly-owned GIC products:
  • GIC products do not have an annuitant.
  • Joint ownership is only permitted on non-registered contracts.
  • Each applicant must sign the application.
  • Names and dates of birth are required for each applicant.
  • Cannot appoint a beneficiary on non-registered contracts. Beneficiary is the Estate.
  • Laws that apply are the Trust and Loan Companies Act and the Civil Code of Quebec.
  • A jointly-owned corporate account can be purchased.
Important points to consider
  • Joint owners can be either Joint tenants with right of survivorship (JTWROS) or Joint tenants in common (JTIC). Note: JWROS is not available in Quebec.
  • For JTWROS owners, the account is automatically transferred to the surviving owner and any interest credited to the account prior to death is reported to the deceased and the surviving owner. Any interest credited after the date of death is taxed to the surviving owner.
  • For JTIC, the account becomes the property of the Estate of the deceased and the surviving owner. Any interest credit prior to the death is taxed to the deceased and the surviving owner. Any interest credited after the date of death is taxed to the Estate of the deceased and the surviving owner. The executor of the estate would provide written direction as to who ownership of the deceased's share should pass to under the will. If the value of the deceased owner's products with us (including his or her share in this contract) is $100,000 or more, probate will be required.
Tax note

One of the taxable benefits of a jointly-owned policy, either AA or GIC product, is that the tax burden can be shared by the owners. The tax slip is issued to both owners, and it is between the clients and CRA, who claims the interest. CRA states that if Mr. & Mrs. Smith each put in 50% of the principal, then each owner should claim 50%.

Retirement income product conversion
  • Money from a non-registered or TFSA Superflex may be used to purchase a payout annuity, provided all minimums and requirements are met.
  • Money from an RRSP Superflex may be transferred to an Income Master RRIF or used to purchase a payout annuity, provided all minimums and requirements are met.

The maturity date is established as follows:

Non-registered and TFSA plans

The maturity date for non-registered plans is December 31 of the year in which the annuitant reaches age 90. The maturity date may be extended by request to December 31 of the year in which the annuitant reaches age 100.

RRSP plans

The maturity date is December 31st of the year in which the annuitant reaches age 71.

DPSP

The maturity date is the policyholder's 71st birthday.

Creditor protection

Provincial insurance legislation contains special rules regarding claims by creditors in respect of life insurance policies and annuity contracts.

Although many provinces have enacted laws protecting registered funds from seizure, no matter what type of contract the funds are in, insurance based products have the added benefit of potential creditor protection for non-registered and TFSA funds.

Benefits payable on death

Provincial insurance legislation states a death benefit payable to a named beneficiary does not form part of the estate of the policyholder and is not subject to claims of the creditors of the policyholder. However, in situations where a deceased has failed to adequately provide for the support of a dependant, most jurisdictions have dependants’ relief legislation which permit a court to award a dependant money from an insurance contract even though there is a named beneficiary.

The situation is not nearly as clear for death benefits paid under beneficiary designations not governed by insurance legislation (e.g. designations in a trust company or bank RRSP). Some court decisions have found that these death benefits are subject to the claim of the deceased's creditors while others have come to the opposite conclusion. In BC there is specific legislation stating that the death benefit of an RRSP goes to the beneficiary outside of the estate.

Protection while a policy is inforce

Provincial insurance legislation states that, if certain conditions are met, in-force life insurance policies and annuity contracts may not be seized by a policyholder's creditors. The conditions depend on the province involved:

  • In all provinces, except Quebec the beneficiary must be either:
    • the spouse (married or common-law), child, parent or grandparent of the life insured; or
    • designated irrevocably (no specific relationship is necessary); or
    • a preferred beneficiary under the pre-1962 legislation.
  • In Quebec the beneficiary must be either:
    • the spouse of the policyholder (married or civil union), or an ascendant or descendent of the policyholder, or
    • designated irrevocably (no specific relationship required).

* The designation of a spouse in Quebec is deemed to be irrevocable unless otherwise stipulated.

Note: There may be no protection if the annuitant is different from the policyholder and the policyholder is the beneficiary.

The Federal Bankruptcy and Insolvency Act specifies that property that's exempt from seizure under provincial law, is not available to be divided among creditors when a client is in a bankruptcy situation. Protection may come from insurance or pension law. You will find more details on pension protection below.

Other forms of creditor protection

There are a variety of other circumstances in which a life insurance policy or annuity contract may have even greater protection from creditors:

  • Both the contract and pension money payments are creditor protected under pension legislation.
Limitations of creditor protection

Creditor protection available under provincial insurance legislation can be lost in a variety of circumstances. Transfers or beneficiary designations made within certain time periods prior to bankruptcy or insolvency, while insolvent, or with the intention of defeating the claims of known creditors can result in the loss of creditor protection.

On the other hand there have been other recent cases, not involving bankruptcy, where the courts have upheld transfers of funds to protected annuity policies, made shortly before a court order was made declaring that the policyholder owed a large sum of money.

The law in this area is inconsistent and is continuing to evolve. It is very difficult for even a very experienced lawyer to give firm opinions as to whether a particular policy is protected or not.

Sun Life Financial and its advisors should not make any specific representations that a certain policy will be exempt from seizure. This will depend on a number of factors totally outside of its knowledge and control. It can only make best efforts to ensure that the client's wishes will be carried out. Special care should be taken however where creditor protection is a concern for a client or when the advisor knows or suspects that the client may be experiencing financial difficulties, bankruptcy, insolvency, divorce or separation. We recommend that clients be referred to their own lawyers for specific legal advice.

Please refer to the chart below for an overview of protection from creditors:
Protection against creditors1 - June 2011

Province2

Pension Plan

LIF/ LIRA3as well as payout from those plans

All RRSPs/ RRIFs/ DPSPs

 

In Bankruptcy only7

All RRSPs/ RRIFs/ DPSPs

Annuities/ insurance products with life insurance companies

(i.e. seg funds)

Annuity with a trust company

(policy value)

Quebec Civil Code Trust
NS Yes No Yes If preferred beneficiary5 No N/A
NB Yes No Yes If preferred beneficiary5 No N/A
PEI Yes4 If preferred beneficiary5 Yes If preferred beneficiary5 No N/A

NFLD &

Labrador

Yes Yes Yes If preferred beneficiary5 No N/A
QC Yes No Yes If preferred beneficiary5 If preferred beneficiary Yes, if withdrawal is not allowed8
ON Yes No Yes If preferred beneficiary5 No N/A
MB Yes Yes Yes If preferred beneficiary5 No N/A
SK Yes Yes Yes If preferred beneficiary5 No N/A
AB Yes Yes, as of June 20096 Yes If preferred beneficiary5 No N/A
BC Yes

Yes, as of November 2008

 

Yes If preferred beneficiary5 No N/A
NWT Yes No Yes If preferred beneficiary5 No N/A

1 There are exceptions to non-seizability : garnishments by Federal Government, debt for family support, family patrimony, fraudulent acts with respect to bankruptcy.
2 For the Northwest Territories, Yukon & Nunavut  - Given that these jurisdictions do not currently have laws excluding RRSPs from seizure, it is quite likely that creditors will be able to seize these assets.
3 Except voluntary contributions in certain provinces.
4 Pension legislation still not in force, but if pension locked-in, the creditor cannot redeem the product.  As well, if we are in the presence of a “preferred” beneficiary, the plan is protected by the Designation of Beneficiaries under Benefit Plans Act.
5 Preferred beneficiary refers to: married spouse and common law spouse (except in Quebec: married spouse/civil union spouse), child, grandchild or parent (Quebec:  ascendant/descendant) and the irrevocable beneficiary Quebec – presumption of irrevocability if married spouse/civil union spouse).  In Alberta, “common law spouse” is referred to as “adult interdependent partner”.  Divorce does not have the same effects in all provinces.  For example, in Quebec, since 1982 the divorce makes null and void the beneficiary designation, but this is not the case in other provinces.  In other provinces, even though the divorce does not make null and void the beneficiary designation, it loses its preferred characteristic.  In Quebec, the relationship of the beneficiary is with the owner.  In other provinces: relationship is with life insured/annuitant.
6 The new legislation states that the exemptions for RRSPs, RRIFs and DPSPs do not apply to a "life insurance contract" (including an annuity) under the Alberta Insurance Act.  Insurance companies will continue to have creditor protection under the provincial insurance act.  The creditor protection under the Insurance Act is not as broad as this legislation.  CLHIA sought to have this section removed.  It appears that Alberta is not going to change the provision.
7 In all provinces/territories creditor protection does not apply to contributions made 12 months prior to bankruptcy.  Federal legislation enacted July 2008 (Bill C-12).
8 Bagnoud (Syndic de), J.E. 2005-978 (C.A.).
Policies issued before December 2009

Superflex is a deferred annuity designed to accumulate funds. It is considered an annuity because at some point in the life of the contract, the product is expected to turn into a payout type of investment.

Superflex was issued as a non-registered contract, a Registered Retirement Savings Plan (RRSP), a locked-in retirement account (LIRA) or a locked-in RRSP.

Investment types

There are 4 different investment types available:

  • compound interest, available for one to ten year terms
  • annual payout, available for one to ten year terms
  • monthly payout, available for one to ten year terms, and
  • daily interest.
Subsequent deposits

Older versions of the Superflex are closed to new sales however we do accept additional deposits to existing policies. The minimum amount for an investment is $1000 for compound interest plans and $5000 for annual or monthly payout plans. If at any time the policy value is less than $500, and we are not making regular payments, we will terminate the policy and forward the balance to the client. This does not apply to a LIRA, as the value may only be paid out according to the rules of the governing pension legislation.

Interest

Interest rates are subject to change at any time as dictated by market conditions. The interest rate assigned to a guaranteed investment will be the rate in effect on the date of the rate guarantee. A rate guarantee may be used to guarantee the current interest rate for 45 days.

Policy value

The policy value on any date will be the total amount in all investments on that date, including accrued interest.

Policy maturity date

The policy maturity date for RRSPs is December 31st in the year of the annuitant’s 71st birthday. The policy maturity date for non-registered contracts is December 31st in the year of the annuitant’s 90th birthday. If we do not receive directions prior to the policy maturity date, we will apply the policy value to establish a payout annuity payable for 10 years, or until the death of the annuitant. If the amount of the monthly annuity payment is less than the amount of our minimum required annuity payment, we have the right to pay the total sum to the owner instead of applying the policy value to provide a payout annuity.

Investment maturities

Investments within a Superflex policy automatically renew to the same term at maturity. The owner may also advise us to direct the funds to an investment of a different type and/or term or to the daily interest investment on or before the maturity date.

Death benefit

Upon the death of the annuitant and receipt of satisfactory proof, we will pay the policy value in effect on the date of death. We will make the payment to the beneficiary listed on the policy records, or to the estate if no beneficiary is listed. The death benefit is not subject to an MVA calculation. If the policy is a LIRA or locked-in RRSP, we will pay the policy value in accordance with the applicable pension legislation.

Withdrawals and transfers

All or part of an investment may be withdrawn at any time, except for a LIRA or Locked-in RRSP. The minimum withdrawal is $500 and an MVA calculation will apply. The client must specify from which investment we are to take the withdrawal. If the remaining investment balance does not meet the minimum, it will be transferred to the daily interest investment.

Market value adjustment (MVA)

If a guaranteed interest investment is terminated before its end date, the investment is subject to MVA. No MVA applies to withdrawals from the Daily Interest Investment. The amount of a MVA is the difference between the accumulated value and the cash surrender value.

One of the least understood concepts is the MVA. Understanding how and why the MVA works is something you can use effectively to your advantage.

Why are MVAs necessary?

Financial institutions offering guaranteed interest investments are at an investment risk and suffer expense losses on early termination of these investments. Therefore, MVAs are necessary to ensure money is not lost.

When do MVAs occur?

Anytime funds are surrendered from a guaranteed interest investment prior to the investment’s end date.

Are MVAs unique to Sun Life Financial?

No. All financial institutions use adjustments of various sorts. It’s important your clients compare these adjustments when comparing the guaranteed interest investments of financial institutions.

How can you best deal with MVAs?

Don’t let your clients put money into a guaranteed interest investment for a period extending beyond the foreseeable time that money will be needed.

How are MVAs calculated?

There are 3 parts to our MVA:

1.  Investment adjustment to offset our investment risk

The objective of the investment adjustment is to compensate for current interest rates being different than the contract rate. The net result is the client neither gains nor loses from a withdrawal which subsequently is reinvested at current rates. We must cash in the investments we have made (bonds, mortgages) so the loss or gain that we incur as a result of the client’s request to withdraw funds from their policy is passed on to the policyholder.

2.  Expense adjustment to recover upfront expenses

The expense adjustment is used to recover the expenses incurred when the contract is issued such as selling and administrative expenses. These expenses are normally recovered on an annual basis throughout the duration of the contract. If an early withdrawal of the funds is made, we must recoup those expenses that have not yet been recovered. This adjustment also covers the extra expenses involved in processing the early withdrawal.

3.  Expense adjustment to account for liquidity risk

Liquidity risk arises whenever the liability holders (clients) demand immediate cash for their financial claims. There are times when this demand for cash results in larger than normal withdrawals for a financial institution. As a consequence, the institution may have to sell some of their less liquid assets to meet the withdrawal demands of the liability holders. Also, some assets with thin markets generate lower prices when the sale is immediate than if the financial institution had more time to negotiate the sale. Sun Life Financial must account for this expense associated with liquidity risk.

The expense adjustments represent the adjustment to the interest rates used in determining the cash value. These expense adjustments can vary by product and are subject to change. They are based on levels at the time of withdrawal, not at the date of deposit.

The calculation of the market value involves:

  • projecting the expected cash flows (maturity value) at the contract rate
  • finding the discount rate, which reflects current interest rates plus the expense adjustment for upfront expenses and liquidity risk
  • calculating the cash surrender value by discounting the expected cash flows at the discount rate to the cash value date
  • the MVA is the difference between the accumulated value and the cash surrender value
Statements

Superflex statements are issued annually in January for the previous year.

Maturity notices will be sent to the client 45 days in advance of a maturity. Confirmation statements will be sent to the client to confirm a new deposit or reinvestment of a matured investment.

TFSA - Successor owner

The following information is designed to clarify how Sun Life Financial administers a successor owner on a TFSA policy.

Even though some applications do not specifically ask for a successor owner to be named, a TFSA policy allows the spouse the option of becoming the successor owner upon death of the owner.

TFSA regulations stipulate that only the spouse of an owner can become the successor owner (the survivor) of the TFSA policy.

In order to ensure that the spouse has the option of becoming the owner they must be the only beneficiary named on the policy. At death they will have the option of taking the value in cash or becoming the full owner of the policy who can exercise all of the ownership rights including the right to designate a beneficiary.

This applies to the following individual guaranteed TFSA policies available at Sun Life Financial:

  • AA TFSA
  • Superflex TFSA
  • Sun GIC Max TFSA*
  • SLF Trust GIC TFSA*

*NOTE: beneficiary designations and successor holder rights do not apply in the province of Quebec for these products.

TFSA - Quick tips
  • When transferring money from another institution watch out for transaction fees. Clients may want to check with the relinquishing institution to confirm whether or not a fee will apply.
  • Make sure you complete a transfer and not a withdrawal. If a withdrawal is completed, the contribution space will only return in the following calendar year and any deposit in the current year will count as a new deposit. Be sure to use Transfer registered assets from another company to a registered product (E63)
    when completing a TFSA transfer from another institution.
  • Clients are able to hold more than one account as long as they adhere to the annual contribution limit. So don’t forget to ask before they make a contribution to make sure they will not exceed their allowable contribution space.
  • Don’t forget unused contribution room from previous years can be carried forward and used in future years.
  • Maximize household deposits - spouses can give each other money to contribute to each other’s TFSA without affecting their contribution room.
  • In a province where the legal age to enter a contract is 19? The contribution room counts when they are 18, so they are eligible to deposit double in their first year.
  • If a spouse is named as the sole beneficiary of the TFSA the spouse has the option of becoming the sole survivor of the plan. This means that they become the planholder and may exercise all of the planholder rights including the right to designate a beneficiary.
  • The contribution to a TFSA must come from either owner. We will accept a cheque drawn on a joint bank account provided the TFSA owner is one of the bank account holders. For example, a client cannot deposit a cheque into his or her adult child’s TFSA or a cheque drawn on an individual’s company account cannot be deposited to their personal TFSA.

Tax and information on death

Death benefit

Death benefit before the maturity date:

  • Pay the accumulated value as of the date of death.
  • If the policy is a LIRA or locked-in RRSP, we will pay the policy value in accordance with the applicable pension legislation.
Note: On the death of the annuitant, the beneficiary of a Superflex may choose to maintain the guaranteed interest investments that existed on the date of death, without a market value adjustment.
Maintaining the investment without a market value adjustment
The beneficiary transfers the investments to their own new or existing Superflex by signing and completing part C of form Beneficiary Claim Statement - E84
If there are multiple beneficiaries

Multiple beneficiaries may also transfer their portion intact into new or existing individual non-registered Superfelx policies provided the transferred amounts meet product minimums

If a successor annuitant exists (not applicable to TFSA)

At death of the annuitant the named successor annuitant will replace the deceased annuitant on the contract, the contract will continue and no death benefit will be payable.

Superflex TFSA (additional information)
Spouse named as beneficiary

If a spouse is named as the sole beneficiary they have the option of assuming ownership as the successor holder. This means that they become the planholder and may exercise all of the planholder rights including the right to designate a beneficiary. In this case investment growth and interest earned after the date of death continue to be tax-free.

If the spouse chooses not to become the planholder they may choose to transfer any or all of the assets to their own TFSA. This transfer will not affect their contribution room as long as they elect this option before the end of the year following the year of death. They must complete and file a government prescribed form RC-240 - Designating an Exempt Contribution to a Survivor Tax-Free Saving Account (TFSA) within 30 days of the transfer of funds to their TFSA plan.

If they do not wish to transfer the assets or become the planholder, the proceeds can be paid to them in cash. Any interest earned after the date of death is taxable to the surviving spouse in this case.

Non-spouse beneficiary

If the spouse is not the sole beneficiary, the cash value of the policy on the date of death is paid to the beneficiary(ies) in a lump sum. Any interest earned or investment growth after the date of death is taxable to the beneficiary(ies).

Taxation

Forms


  • Note: Please obtain a supply of this application through through through . If there is a need to print this copy to open a new account, please ensure a copy of it and the attached contract are provided to the client. A copy should also be retained for advisor records.


  • Note: Please obtain a supply of this application through through through . If there is a need to print this copy to open a new account, please ensure a copy of it and the attached contract are provided to the client. A copy should also be retained for advisor records.