Accumulation Annuities (AA) and Guaranteed Investment Certificates (GIC)
Accumulation Annuities (AA) in Canada
Accumulation Annuities (AA) are a kind of guaranteed investment only offered through the insurance industry. They are very similar to GICs, but because they are offered by a life insurance company they have different guarantees, and the added benefits of a beneficiary designation and potential creditor protection.
With an AA, you can start with a lump sum or make periodic deposits at regular intervals, or on a flexible payment basis. The value within the annuity grows (accumulates) as deposits are made and as it earns interest. You can hold an AA as part of a registered or non-registered savings or investment plan. You are guaranteed to receive a set interest rate over a predetermined term, and your investment is protected by specific insurance legislation.
You may not have heard of this investment option, but accumulation annuities offer added advantages for people thinking of estate planning.
AA – Estate planning advantages
Usually, only registered investments like RRSPs and pension plans let you name a beneficiary. But an accumulation annuity offered through the life insurance industry lets you name a beneficiary and avoid the trouble and expense of estate and probate fees, in case you were to die. If your spouse is named as your beneficiary, there are even more advantages, namely the tax roll-over provisions and other benefits we can explain to you at Life Guard Insurance.
AA – Potential creditor protection
If the beneficiary you’ve named qualifies, accumulation annuities are generally protected against seizure by creditors. This can be a big advantage for business owners and professionals wanting to protect against an unexpected lawsuit or bankruptcy.
AA – Security and safety
Accumulation annuities are backed by:
- The financial strength of Canada’s major insurance companies. Life Guard Insurance only chooses accumulation annuities from top rated Canadian insurance companies that have always met their payment obligations.
- Assuris, to the limits it sets. All insurance companies that Life Guard Insurance places any insurance policy with is a member of Assuris. For information about this protection, see the Assuris Protection Brochure.
AA – Flexibility
Choose from a variety of investment terms, either daily interest investment, or guaranteed interest investments.
AA – Fixed terms, or you choose the end date
Available terms are 1 to 10 years, however you can also choose a specific date if you prefer.
AA – 45-day rate guarantee
You can lock in your interest rate up to 45 days before you deposit your money.
AA – Liquidity
Unlike many guaranteed investments, you can get an accumulation annuity which is fully redeemable if you need it. This lets you get all or some of your money if you need it unexpectedly, but be aware there may be penalties.
AA – Competitive interest rates
As insurance brokers at Life Guard Insurance, we can shop the entire accumulation annuity marketplace on your behalf and find the highest interest rate guarantee on the market.
Insurance Guaranteed Investment Certificates (GIC) in Canada
Guaranteed Investment Certificates (GIC) are secure investments that guarantee to preserve your principal. Your investment earns interest, at either a fixed or a variable rate, or based on a pre-determined formula. A GIC often forms the foundation of a well-balanced portfolio.
- Security and safety—both your original investment and interest payments are guaranteed
- Competitive interest rates—guaranteed for the full term of the investment
- Flexible investment terms—ranging from one day to five years, and up to ten years
- Choice of interest payment frequencies e.g. monthly, annually
- Eligible for registered investment plans (RSPs)
Various types of GIC for greater flexibility
- Guaranteed-return GIC where your money will grow as expected
- Interest rate-linked GIC make it easy to benefit from any increase in interest rates without having to adjust your investments
- Market-linked GIC offer you the growth potential of equity markets by linking to one or more indices or mutual funds. Your principal is guaranteed, while return is variable and will depend on the performance of the underlying investment
1. Benefits listed are not applicable for all types of GIC