What is a life annuity?
Here's what you need to know.
Guaranteed income payments for life
A life annuity is an insurance contract that guarantees you’ll receive income payments for life – or 2 lifetimes, for a joint life annuity. Once you’ve purchased your annuity, you never have to worry about how that money is invested or how long your income will last. Income from a life annuity may also qualify for the federal pension income tax credit (of qualified pension income).
You should consider a life annuity if:
- You are a Canadian looking for a source of guaranteed lifetime income, typically for retirement
- You’re interested in supplementing other sources of guaranteed lifetime income such as Canada Pension Plan (CPP), Old Age Security (OAS) or a defined benefit pension
- You want an “income floor” to ensure you have enough guaranteed income to pay your basic essential living expenses throughout your retirement years
We'll issue a policy only if the policyholder and annuitant(s) are Canadian residents. There is an exception if the policyholder has an existing Sun Life Financial policy with a contractual right to purchase a payout annuity.
Life annuity types
- Single life annuity
- Joint life annuity
- Registered (including locked-in funds): ages 18 to 100*
- Non-registered: ages 0 to 100*
*Subject to legislation
- Minimum amount: $5,000 (combined total from all sources)
- Maximum amount: $5 million*
*Applications with premiums over $5 million are subject to review. Special pricing may apply.
- Registered retirement savings plan (RRSP)
- Registered retirement income fund (RRIF)
- Locked-in retirement account (LIRA)
- Deferred profit sharing plan (DPSP)
- Life income fund (LIF)
- Locked-in retirement income fund (LRIF)
- Registered pension plan (RPP) funds
- Non-registered funds
Payment deferral periods
Payments may be deferred for a maximum of 10 years, subject to restrictions based on the source of premium.
0 - 40 years, subject to restrictions based on the source of premium
Monthly, quarterly, semi-annually or annually
- Level payments. Payment amount remains the same throughout the payment period.
- Indexed payments. Income increases yearly by a fixed percentage. You select an increase between 1% and 4% at purchase. Not available for prescribed annuities.
- Reducing payment (joint life annuities). Income reduces by a certain percentage selected at issue when one of the annuitants dies.
- Integrated payment. Income decreases when CPP, QPP or OAS payments begin. Not available for prescribed annuities.
- Registered funds are subject to legislative restrictions.
- Registered. Income from an annuity purchased with registered funds is fully taxable to the policyholder in the year it's received.
- Non-registered. Only a portion of the income from an annuity purchased with non-registered funds is taxable. The amount of tax and when it is payable depends on the tax treatment the annuity qualifies for.
- Withholding tax. Canadian withholding tax is mandatory for annuities purchased with RPP (locked-in and non-locked-in), LIF or DPSP premiums.
Death benefits depend on whether income has started, the source of premium and the guaranteed period chosen.
A payout annuity cannot be partially or fully surrendered and has no cash surrender value.
Essential Care Annuity
If you have a life-shortening condition, we'll consider issuing an enhanced life annuity. This can result in a lower premium or higher income than for someone of the same age and gender without a health impairment. You must provide acceptable medical evidence and special underwriting rules will apply.
Want to know more?
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