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Is guaranteed retirement income for life possible?

Canadian retirees in the dark about annuities: RBC Poll

94% of CDNS looking for guaranteed income for life, yet 61% are in the dark about annuities says @RBCInsurance

Summary: 94% of Canadians aged 55 to 75 ‘agree’ that they would ‘like to have guaranteed income for life’ when they retire and 58% are concerned that they may outlive their retirement savings. Annuities can provide the ideal solution for retirees yet 61% are in the dark about how annuities work.  

TORONTO, November 17, 2015 -  While most Canadian retirees want guaranteed income for life, they are in the dark when it comes to an important retirement solution. According to a recent RBC Insurance survey, 94 per cent of Canadians aged 55 to 75 agree that they would like to have guaranteed income for life when they retire, but 61 per cent say that they don’t understand what an annuity is and how it might help.

Annuities can form an important component of a retirement plan because they provide guaranteed income for life that is protected from stock market volatility. Although the majority (58 per cent) of respondents indicated that they are worried about outliving their retirement savings, only 35 per cent are exploring or considering annuities as part of their retirement plans.

“Outliving retirement savings and having enough income in retirement are real concerns as Canadian retirees are living longer and are more active in their retirement years,” says Parul Vora, Head of Wealth Products, RBC Insurance. “Annuities are an ideal solution to help alleviate some of that financial uncertainty and provide peace of mind and financial stability.”

Public pension plans do not provide adequate retirement income
Canadians have many investment avenues to consider as they plan for retirement including personal savings, company pension plans and Canada’s public pension plans (CPP/QPP/OAS), but just 22 per cent of those surveyed ‘agree’ that Canadian pension plans will provide enough retirement income.

Beneficiary Benefit
An important point to remember about annuities is that they can provide payment guarantee options to your beneficiary. By choosing a Guaranteed Payment Period of up to 25 years, your income stream will transfer to your beneficiary if you pass away during the guarantee period.

“With guaranteed income for life, potential tax benefits and the ability to protect beneficiaries, Canadians need to familiarize themselves with annuities and take a close look at how annuities can help them in retirement,” added Vora.

True or False – What Canadians said

  • Annuities can provide income for life. True and 70 per cent of those surveyed answered correctly. Annuities provide an income stream that is guaranteed for life. That’s a set amount of money each month or year for life.
  • Annuities can only be purchased from a licensed insurance advisor. True, but only 40 per cent of respondents answered correctly. Please speak with your licensed insurance advisor to ensure you are purchasing the annuity solution that is right for your individual situation.
  • There are potential tax advantages to investing in an annuity. True and 71 per cent answered correctly. When purchased with non-registered funds, the interest portion of your monthly payment is spread out evenly over the life of the annuity.
  • Annuities are not a good investment during low interest environments. False and Canadians were evenly split on answering correctly. Generally, the interest rates that influence annuity payouts are long-term rates, which means they are typically higher than one-to five-year rates that investors may be focused on. It is important to note that interest rates are only one factor that influence annuity payouts.
  • I can’t use my RRSP to invest in an annuity. False and 73 per cent answered correctly. You can use your RRSP and/or RRIF savings to purchase an annuity.

About the RBC Insurance Survey
RBC Insurance commissioned Ipsos to conduct a survey to gauge public opinion of Canadian workers aged 55 to 75 regarding matters related to annuities and retirement income. The survey was conducted between August 7 to 14, 2015. In total, a sample of n=1,000 Canadians aged 55 to 75 was surveyed online using Ipsos’s I-Say online panel. The precision of Ipsos’s online survey are measured using a credibility interval, in this case the results are considered accurate to within ± 3.5 percentage points, 19 times out of 20, had all Canadian adults aged 55 to 75 been polled.

About RBC Insurance
RBC Insurance®, through its operating entities, provides a wide range of travel, life, health, home, auto, wealth and reinsurance products and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance has more than four million clients globally. We are one of the largest Canadian bank-owned group of insurance companies, and among the fastest growing insurance organizations in the country. RBC Insurance employs more than 3,000 employees, and is the brand name for the insurance operating entities of Royal Bank of Canada.

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For more information, please contact:
Greg Skinner, RBC Corporate Communications, 416-294-5579