The tax-efficient annuity products have been approved since 2020
It’s taken a few years, but a major Canadian financial institution has become the first to launch an advanced life deferred annuity (ALDA) product.
The tax rules were changed in 2020 to allow the tax-efficient product that enables those who don't need to withdraw from their retirement accounts in the early years of retirement to delay taxation past their 71st birthday.
Desjardins’ ALDA, available through financial advisors, will use premiums for investments that meet strict ESG criteria with exclusions in line with the firm’s Responsible Investment Policy.
"Desjardins is continuing to innovate in the realm of investment solutions in an effort to help investors be more financially empowered. With the ALDA, advisors now have an additional tool at their disposal to help clients manage the risk that they might run out of savings in their later years while deferring taxation," underscores Philippe-Olivier Dumas, Section Manager, Product Development, Guaranteed Investment Funds and Annuities Team.
In a recent article, Jason Pereira, financial planner at Woodgate Financial, cited ALDAs as one of the retirement income solutions that Canada could use but has been slow to adopt.
“This is a proven market. The ALDA is an almost-100% carbon copy of QLACs [qualified longevity annuity contracts] in the US,” he told Wealth Professional.
The recent Mercer CFA Institute Global Pension Index gave Canada’s retirement income system a B rating and a score above the global average, but also suggested improvements that could be made, including a wider range of options.
“Some products are being developed, but there is room for more other flexible and efficient products,” F. Hubert Tremblay, principal, and senior wealth advisor with Mercer Canada told Wealth Professional.