Segregated Fund are very similar to mutual funds except that they come with certain guarantees that are not available with mutual funds. A large number of mutual funds available in Canada are available as a Seg Fund offering the protection features that are integral to this most unique product.
How They Work
- Deposits are made to a Segregated Fund policy to the investment options that you choose based your risk tolerance, investment objectives and time horizon.
- The money is managed by an investment manager who invests in stocks, bonds or other assets, depending on the fund's investment objectives as stated in its prospectus or information folder
- Segregated Funds have unique features that can allow more security and flexibility and can remove some of the risk associated with regular mutual funds
- The management fees of Segregated Funds are higher than comparable mutual funds
Segregated Fund Policies - A Range of Features
Option to Guarantee Lifetime Income
Longevity, inflation and market volatility...these are all things that can upend even the most carefully crafted retirement plan. Most segregated fund policies have an option that will protect you from the chance you will outlive your money, minimize the ravages of inflation, and tame the volatile markets that we have recently experienced.
Maturity and Death Benefit Guarantees
Segregated fund policies provide a maturity guarantee after a certain period (usually 10 years) and an immediate principal guarantee upon death (75% or 100% of the premiums paid less redemptions).
In the event of bankruptcy or a legal judgement against you, Segregated Funds may provide protection from creditors. The laws vary from province to province, and there are often cases before the court challenging under which circumstances creditor protection may apply. You should speak to your advisor in order to make sure that this will apply in your case
Naming a beneficiary can lead to fast settlement of your estate
Segregated fund policies allow you to name a beneficiary (which you can't do at all on non-registered investments that are not segregated funds). This means that the proceeds of the segregated fund policy are paid directly to your named beneficiary, bypassing probate and mostly avoiding costly executor, legal, and accounting fees that could cost five to ten percent of the value of the asset. Also, bypassing probate can save a lot of time and get the proceeds of your estate to the intended beneficiaries much more quickly.
Features vary by age and product. Contact us for more information.