LLQP Segregated Funds & Annuities · Component 2.4 · 30% of the exam
An employee leaves a job with a small defined contribution pension balance. Pension legislation in many jurisdictions:
- Arequires the employer to purchase an immediate annuity for the departing member at once
- Brequires the balance to remain locked in regardless of how small the amount happens to be
- allows a small balance below a stated threshold to be unlocked and taken in cash
- Dallows the member to transfer the balance to a tax-free savings account without any tax
Correct answer: C) allows a small balance below a stated threshold to be unlocked and taken in cash
Most pension statutes let a very small entitlement be paid out rather than administered for decades. The threshold and the calculation vary by jurisdiction, so the agent must check the rules that govern that particular plan.
Why the other options are wrong
- AAn employer is not required to buy an annuity when a member leaves employment.
- BSmall balance unlocking provisions exist precisely to avoid this outcome.
- DPension money cannot be transferred into a tax-free savings account.
Exam tip
Small balances can often be unlocked; always check the governing jurisdiction.
Common mistake
Telling every departing member that pension money is locked in without exception.
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
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