LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's pension plan is a 'target benefit' or 'shared risk' plan. The assessment should recognize:
- AA defined contribution plan, since the member's benefit depends on the plan's investment results
- A plan that targets a DB-style benefit but may reduce benefits, even accrued ones, if underfunded
- CA tax-free savings arrangement, since target benefit plans are funded from after-tax contributions
- DA guaranteed defined benefit pension, since the target is a legally binding promise
Correct answer: B) A plan that targets a DB-style benefit but may reduce benefits, even accrued ones, if underfunded
Hybrid plans shift some risk to members. The client's 'guaranteed' income may be adjustable.
Why the other options are wrong
- AIt is not an individual account plan; benefits are formula-based targets.
- CIt is a pension plan with pre-tax contributions, not a TFSA.
- DBenefits can be reduced; the target is not guaranteed.
Exam tip
Target benefit plans: DB-like target, adjustable benefits.
Common mistake
Treating a target benefit pension as fully guaranteed.
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.