LLQP Segregated Funds & Annuities · Component 2.4 · 30% of the exam
A member of a registered pension plan is surprised that his personal contribution room is smaller than expected. The agent should explain that:
- Athe room was transferred to the employer, which may use it for its own plan contributions
- Bmembership in an employer plan removes personal contribution room for that year entirely
- Ccontribution room is reduced whenever the pension plan's investments have performed well
- a pension adjustment reported by the employer reduces the room available for the next year
Correct answer: D) a pension adjustment reported by the employer reduces the room available for the next year
The pension adjustment measures the value of the benefit earned in the plan and reduces personal contribution room for the following year. This keeps the total tax-assisted saving broadly equal between plan members and those without a plan.
Why the other options are wrong
- AContribution room belongs to the individual and cannot be transferred to an employer.
- BRoom is reduced by the pension adjustment, not eliminated by membership itself.
- CInvestment performance does not change the pension adjustment calculation.
Exam tip
Pension adjustment this year equals less personal contribution room next year.
Common mistake
Explaining a smaller contribution limit without naming the pension adjustment.
What this tests
CISRO competency component 2.4 — 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.