Desjardins' ALDA offers a new way to manage longevity risk and secure future income efficiently
An exclusive feature by Wealth Professional in partnership with Desjardins Insurance highlights the challenges Canadians face in adapting retirement strategies to account for increasing life expectancies.
Many risk running out of money or sacrificing their lifestyle due to insufficient planning.
Philippe-Olivier Dumas, head of product development at Desjardins Insurance, discussed the Advanced Life Deferred Annuity (ALDA), a first-of-its-kind offering by a Canadian insurer. The ALDA provides a strategic tool to secure income in later years.
“It’s about targeting longevity risk more efficiently,” Dumas explained, allowing clients to preserve assets during early retirement while locking in income for later years.
On average, Canadians underestimate their life expectancy by nearly four years. This miscalculation, according to the article, underscores the need for realistic retirement planning.
The ALDA allows pre-retirees and retirees to defer payments up to age 85, enabling clients to maximise investment growth and secure steady income during later years.
Dumas highlighted current market conditions as an ideal time for locking in ALDA rates. “Clients benefit from favourable conditions, especially if interest rates were to decline further,” he said.
With fewer Canadians relying on employer-provided pensions, the ALDA provides a safety net and simplifies financial planning for retirement.
The ALDA also offers a tax-advantaged solution. Unlike traditional annuities or RRIFs, which require taxable withdrawals starting at age 71, the ALDA defers taxable income until the end of the year individuals turn 85.
This strategy helps retirees shelter funds from taxes for an additional 14 years, providing greater control over retirement income.
“Even if someone is already in a RRIF,” Dumas noted, “locking in for age 85 still makes sense. The ALDA provides flexibility and peace of mind for a variety of retirement situations.”
The ALDA aligns with Desjardins Insurance’s commitment to responsible investing.
Deborah Debas, senior responsible investment specialist at Desjardins, explained that the company integrates environmental, social, and governance (ESG) criteria into its annuity offerings.
“We like to back up our claims with data,” she stated, referring to the Responsible Annuity Annual Report, which details sustainability-focused investments.
The ALDA portfolio includes government and corporate bonds, green bonds, and infrastructure projects. Desjardins actively engages with companies to ensure adherence to ESG practices.
For example, the firm questioned a transportation company on its climate risk management after fires and floods disrupted its operations.
“Clients can leave their money with Desjardins Insurance, knowing it’s being professionally managed according to strict ESG criteria,” Dumas assured.
The article emphasises that the ALDA can be integrated into various financial strategies, from supplementing government benefits to providing a safety net for those without pensions.
