LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client retiring with locked-in pension money asks about her options. The agent should explain that locked-in funds generally may be used to:
- Abe moved into a tax-free savings account so that all later growth escapes income tax
- Bbe withdrawn in a single lump sum at any age without restriction of any kind
- purchase a life annuity or transfer to a life income fund, subject to pension rules
- Dbe assigned directly to an adult child as a gift, provided the transfer is documented properly
Correct answer: C) purchase a life annuity or transfer to a life income fund, subject to pension rules
Locked-in money must ultimately provide retirement income, so the usual choices are a life annuity or a life income fund with minimum and maximum withdrawal limits. Limited unlocking may be available in specific circumstances set by the governing legislation.
Why the other options are wrong
- ARegistered pension money cannot be moved into a tax-free savings account.
- BLocked-in money cannot normally be taken as a lump sum; that is what locking in means.
- DPension entitlements cannot be assigned away to another person as a gift.
Exam tip
Locked in means retirement income only: a life annuity or a life income fund.
Common mistake
Treating locked-in money as though it were an ordinary registered savings plan.
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.