LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A 'guaranteed minimum withdrawal benefit' (GMWB) segregated fund contract provides:
- ANo withdrawals until the maturity date, in exchange for a higher guaranteed amount at that date
- BA lump sum only at maturity or death, calculated on the guaranteed base rather than market value
- A guaranteed annual withdrawal for life or a set period regardless of markets, with market participation
- DA guaranteed rate of return on the deposit, credited annually whether or not the fund earns it, for the life of the contract
Correct answer: C) A guaranteed annual withdrawal for life or a set period regardless of markets, with market participation
GMWB products address longevity and sequence risk while preserving flexibility and estate value. They carry additional fees and rules (excess withdrawals reduce the base).
Why the other options are wrong
- AWithdrawals are the point of the product.
- BIt provides periodic income, not a lump sum.
- DReturns are not guaranteed; the withdrawal amount is.
Exam tip
GMWB: guaranteed withdrawal for life, market participation, estate value; excess withdrawals cut the base.
Common mistake
Taking withdrawals above the guaranteed amount and eroding the guarantee.
What this tests
CISRO competency component 2.2 — 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
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