Life Annuities

Will I have income for the rest of my life?
A life annuity guarantees benefit payments for the rest of your life (as the annuitant) and provides the same creditor protection as life insurance.


An annuity pools capital and investment income of a group of annuitants and makes payments from that pool

  • funds left by early deaths provide benefits for those who live beyond their life expectancy
  • once benefit payments start, you cannot ask to have them stopped or converted to a lump sum
  • payments are based on
    • age: higher for older since shorter life expectancy
    • gender: higher for males
    • interest rates at the time of purchase: higher rates → higher benefit
    • smoking status (confirm)
  • benefits vary → shop around

The following end by Dec 31 of the calendar year in which the annuitant reaches age 91

For Joint and Last Survivor, “91” is based on the age of the younger spouse.


  • insure against the risk of outliving your capital
  • guarantee a specified regular income for life or specified period
  • payments based on annuitant’s age, gender, health, life expectancy
  • can be indexed (maximum of 4% if using registered funds)

Immediate Annuity

  • Commutable
    • can cancel and get future annuity benefits paid out in a lump sum (may be restricted to cases of extreme hardship)
  • Non-commutable
    • cannot cancel

Deferred Annuity

  • not available on a tax-favoured prescribed basis
  • creditor-protected if beneficiary named (revocable)
  • if registered, must mature by Dec 31 of the calendar year in which the annuitant reaches age 71
  • can make withdrawals during the accumulation period but a Market Value Adjustment and loads may apply
  • the annuitant owns the annuity contract but not the deposits (with a GIC, the investor owns the deposits)
  • two types
    • True
      • preselect future annuity benefit, commencement date, frequency of payment
    • Regular
      • can determine details in the future

Types of Life Annuities

There are four types of life annuities:

  1. straight life (also called "life only")
    • guaranteed income for the life of the annuitant
    • benefits stop when the annuitant dies (no payment to beneficiary)
    • highest payout
  2. straight life with a guaranteed number of payments
    • guaranteed income for the life of the annuitiant, but no less than a specified period (e.g., 5 years, 10 years, 20 years)
    • lower payout than a straight life annuity
  3. installment refund
    • payments continue until the entire purchase price is paid out (not for life)
  4. cash refund
    • guaranteed income for the life of the annuitant
    • upon death of the annuitant, any difference between the purchase price and the payments made is paid out as a lump sum

A Joint and Last Survivor (JLS) option is available

  • generally for spouses, but can use for any two individuals
  • provides guaranteed income while either life survives
  • income may reduce after the first death

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