LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client asks how annuity income compares in a low-interest-rate environment. The agent should explain:
- AInterest rates do not affect annuities, since the income is set by the annuitant's age alone
- BAnnuities are always the best choice regardless of rates, because lifetime income cannot be bought elsewhere
- CAnnuities are unavailable when rates are low, since insurers withdraw them from the market
- Income is lower when rates are low; laddering, partial annuitization or waiting are strategies
Correct answer: D) Income is lower when rates are low; laddering, partial annuitization or waiting are strategies
Interest-rate sensitivity is a real annuity consideration. Laddering reduces timing risk.
Why the other options are wrong
- ARates are a primary pricing input.
- BSuitability depends on rates and needs.
- CThey remain available at lower income levels.
Exam tip
Low rates → ladder annuity purchases; mortality credits grow with age.
Common mistake
Annuitizing everything at once at a rate low point.
What this tests
CISRO competency component 2.3 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.