LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing coverage includes a 'group annuity' from a former employer's terminated pension plan. This means:
- The pension obligation was transferred to an insurer that pays it as an annuity
- BThe client received or will receive a lump sum equal to the commuted value of the pension
- CThe pension was lost when the plan terminated, and the client should claim from the guarantee fund
- DThe client holds a LIRA into which the plan's assets were transferred at termination
Correct answer: A) The pension obligation was transferred to an insurer that pays it as an annuity
Annuity buyouts are how terminated DB plans settle obligations. The client's pension continues through the insurer.
Why the other options are wrong
- BThe settlement is an annuity, not cash.
- CThe obligation continues with the insurer.
- DA LIRA holds a lump-sum transfer; this is an annuity.
Exam tip
Pension wind-up → group annuity from an insurer.
Common mistake
Assuming a terminated pension plan means lost benefits.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.