Segregated funds can provide income regardless of central bank policy
After two rate hikes earlier this year, The Bank of Canada decided discretion is the better part of valour with its latest announcement. The BOC maintained its benchmark rate of 1% as the central bank adopted a more cautious approach. Canada’s economy has performed strongly in 2017, yet risks persist, which is being reflected in interest rate policy.
Any fixed income investors hoping for increasing rates may have to temper their expectations. Yields in the space have been minimal since the financial crisis, but there are options out there for those seeking consistent returns.
Empire Life has just launched its Class Plus 3.0 fund that provides guaranteed retirement income for life.
The product, an update on its 2.1 offering, is in response to Canada’s demographic shift and changing attitudes towards retirement. People now retire at varying ages, and Empire Life believes Class Plus 3.0 gives the flexibility consumers now expect.
Mike Stocks, chief marketing officer, Retail at Empire Life explains how the company has had to respond to a changing environment for retirees.
“Looking at what consumers are after, study after study shows they want guarantees,” he says. “That’s why you see a lot of people going into fixed income securities. This product guarantees the amount, and you also have the ability to take advantage of market performance so your asset base can grow.”
Class Plus 3.0. is a guaranteed minimum withdrawal benefit (GMWB), more traditionally known as a variable annuity. Its predecessor, Class 2.1 was on the market for just over two-and-a-half years, and Stocks is confident consumers will be receptive to the updated version.
“What consumers and advisors will be most interested in is that we have lower fees,” he says. “Our costs have dropped between 15 and 25 basis points, depending on which funds you choose in the product.”
The lifetime withdrawal amount (LWA) has also increased compared to the 2.1 product, and can start from as early as age 55.
In Stocks' view, the Annual Automatic Income Reset function is another major selling point, considering the ongoing low interest rate environment.
“People are looking for yields and those guaranteed bond tools just haven’t been delivering the returns people need,” he says. “When I talk about LWAs, that can range from as low as 3.5% and as high as 5.5%, versus the returns that people are getting from fixed income that are in the 1-2% range for GICs and high-interest savings accounts.”
He adds: “If you have an equity component, you will get those market resets that drive your asset base higher and you will take an even better percentage when you use your LWA on a higher income base. So the returns will definitely outperform some of those fixed income tools.”
Related stories:
Empire Life CEO identifies next major cost for insurers
Empire Life introduces new online application for segregated funds
Any fixed income investors hoping for increasing rates may have to temper their expectations. Yields in the space have been minimal since the financial crisis, but there are options out there for those seeking consistent returns.
Empire Life has just launched its Class Plus 3.0 fund that provides guaranteed retirement income for life.
The product, an update on its 2.1 offering, is in response to Canada’s demographic shift and changing attitudes towards retirement. People now retire at varying ages, and Empire Life believes Class Plus 3.0 gives the flexibility consumers now expect.
Mike Stocks, chief marketing officer, Retail at Empire Life explains how the company has had to respond to a changing environment for retirees.
“Looking at what consumers are after, study after study shows they want guarantees,” he says. “That’s why you see a lot of people going into fixed income securities. This product guarantees the amount, and you also have the ability to take advantage of market performance so your asset base can grow.”
Class Plus 3.0. is a guaranteed minimum withdrawal benefit (GMWB), more traditionally known as a variable annuity. Its predecessor, Class 2.1 was on the market for just over two-and-a-half years, and Stocks is confident consumers will be receptive to the updated version.
“What consumers and advisors will be most interested in is that we have lower fees,” he says. “Our costs have dropped between 15 and 25 basis points, depending on which funds you choose in the product.”
The lifetime withdrawal amount (LWA) has also increased compared to the 2.1 product, and can start from as early as age 55.
In Stocks' view, the Annual Automatic Income Reset function is another major selling point, considering the ongoing low interest rate environment.
“People are looking for yields and those guaranteed bond tools just haven’t been delivering the returns people need,” he says. “When I talk about LWAs, that can range from as low as 3.5% and as high as 5.5%, versus the returns that people are getting from fixed income that are in the 1-2% range for GICs and high-interest savings accounts.”
He adds: “If you have an equity component, you will get those market resets that drive your asset base higher and you will take an even better percentage when you use your LWA on a higher income base. So the returns will definitely outperform some of those fixed income tools.”
Related stories:
Empire Life CEO identifies next major cost for insurers
Empire Life introduces new online application for segregated funds
