LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
An annuity purchased with RRSP or RRIF funds (registered annuity) has payments taxed:
- AAs capital gains, since the RRSP's growth was accumulated through investment rather than earned
- Fully as income when received, since contributions were deducted and growth was deferred
- CNot at all, since the tax was paid when the contributions were originally earned
- DOnly on the interest element, with the capital portion returned tax-free as in a prescribed annuity
Correct answer: B) Fully as income when received, since contributions were deducted and growth was deferred
Registered annuities carry the plan's tax status: everything out is income. They qualify as pension income for splitting and the pension income credit (age limits apply).
Why the other options are wrong
- ARegistered payments are income, not gains.
- CEvery dollar of a registered annuity payment is taxable.
- DThe full payment is taxable, not just the interest.
Exam tip
Registered annuity = fully taxable payments; pension income for splitting/credit.
Common mistake
Applying prescribed annuity treatment to a registered annuity.
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
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