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Locked in Annuities
February 3, 2014
3:18 pm
nazirji
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February 3, 2014
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OK so my wife is 65 and I am 64 - she applied with SunLife for a single life locked in annuity with a 20 yr guaranty - after the application was made - Sunlife asks us to sign Form 3 Waiver of Joint and Survivor Pension from FSCO - which states the surviving spouse will not be entitled to any joint and survivor pension provided by section 44 of the Pension Benefits Act - my question is does that mean that if one of us were to die - the other would not receive the monthly survivor benefit that is paid out to all Canadians eligible who have contributed into the CPP - SunLife says that it has nothing to do with it - however I would like to hear what readers have to say. The money going into the sunlife annuity is from a LIF locked in account.

February 3, 2014
5:35 pm
nazirji
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Thanks for the reply - and I am aware of the assures - also true that on a single locked in annuity 20 yr if my wife passes away before the 20 year I will continue to receive the monthly payout until 20 years end - after 20 years she would continue to receive as long as she is alive.
However it is the requirement of this form 3 that is a must requirement to sign when taking out a single locked in annuity that concerns me - lawyers are expensive - and we are trying to survive as is - thought that some good Samaritan may be familiar - all we are concerned with is that the wording of survivor pension on form 3 - hopefully it has no bearing on the monthly survivor benefit that a widow/widower receives from CPP when a spouse passes away and this signing off the waiver is strictly to do with the fact that it is not a joint annuity. Perhaps some one in similar situation reads and has answers

February 3, 2014
8:31 pm
GS1
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Disaclaimer: I am NOT a lawyer nor an expert in anything (other than using Google to find forms);

I found Form 3 from the FSCO and my reading of it says you are waiving your mandated right to a suvivor pension relative to the pension (annuity) your wife would be applying for.

The salient language from the form follows:

We understand that section 44 of the Pension Benefits Act provides that the pension paid to the member or former member from the
Name of pension plan

Name of pension plan

must be paid as a joint and survivor pension if we are spouses on the date that the payment of the first instalment of the pension is due and if we are not living separate and apart at that time. We also understand that the amount of pension payable to the surviving spouse must not be less than 60% of the pension paid to the member or former member while we are both alive.

We understand that we may waive our right to the joint and survivor pension provided by section 44 of the Pension Benefits Act by signing this waiver.

We understand that by signing this waiver, the spouse is giving up the right to a survivor pension on the death of the member or former member, as provided by Section 44 of the Pension Benefits Act.

We hereby waive our right to a joint and survivor pension provided by section 44 of the Pension Benefits Act by signing this waiver in the presence of a witness.

We understand that we may cancel this waiver at any time before the date of the commencement of payment of the member’s or former member’s pension.

So, my reading of this boils down to:

If one were to be elegible for a pension AND
One had a spouse on the date the first payment was due AND
The spouse dies THEN

The surviving spouse is entitled to a legally mandated survivor pension of not less than 60% of the orginal BUT
The surviving spouse can waive Section 44 (which must be the section that mandates the survivor pension) prior to the first payment.

When you fill out this waiver form you are also referring to a blank line which is titled "Name of pension plan" -- so, I suspect this would clearly name the plan and thus would NOT be applicable to any other plan.

At the very bottom of the form it says:

NOTE: Prior to completing this form, each party should consider obtaining independent legal advice concerning their individual rights and the effect of this waiver.

and as I said at the beginning of this message: I am NOT a lawyer nor an expert in anything.

GS

February 4, 2014
11:43 pm
Loonie
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I was just trying to decipher some of this info for my own benefit, actually.
My conclusion (and I too am not a lawyer or any kind of related professional) is that, in Ontario at least, locked-in plans appear to provide some protection to a spouse. I saw somewhere that one can't opt out of this without the written agreement of the spouse. However, there are various circumstances under which locked-in plans may be unlocked, and this rule may apply to some and not to others. I STRONGLY recommend you read through everything that is on the internet from the Ontario FSCO if you are in Ontario, because the answer is in there somewhere. I wish I had seen your question before I was looking through those pages. I believe GS has identified the relevant section, but you would be well advised to read through the whole thing yourself. It's not that hard to follow.
I don't think it would have anything at all to do with CPP, and can't imagine why it would. If that continues to be a concern for you, I suggest you phone Service Canada and simply ask them. They should be able to tell you, and it doesn't cost anything.

February 5, 2014
12:06 am
Loonie
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I also think SD is right in saying that with a single life annuity with 20-yr guarantee, the amount that it pays out will have been calculated based on her age and gender, not yours. If she dies before the time is up, her beneficiary (presumably you) ought to get whatever was remaining of the 20 years, but you should read that wording carefully to make sure that this is what is meant by "guarantee".

FSCO is an Ontario government agency. CPP is Federal.

The thing you are being asked to sign is needed because it's a locked-in account, as far as I know. They would need you to waive it so that the rules governing the annuity can take precedence, i.e. the 20yr single life etc. rather than the other arrangement normally mandated by law. The fact that the FSCO provides such a form suggests that this is entirely legitimate. However, it also means that if you did not agree, then she couldn't do it. It would appear that if you don't sign it, you have some other entitlement to that locked-in LRIF if she dies first which is enshrined in Section 44. I don't really know what Section 44 says, but I think all the laws of Ontario are online somewhere and you should be able to look it up. It appears that it would entitle you to 60% of "the pension", whatever that might mean in this circumstance.

Again, I am not a professional, but I don't see any problem with signing it as long as you are agreeable to your wife using this money to buy this kind of annuity. I think that's what it's really about. In that sense it might be considered irrelevant.

February 5, 2014
7:46 pm
nazirji
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February 3, 2014
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Thank You all very much - as I indicated that perhaps the signing off has only to do with the locked in annuity - it is just that when I read form 3 about the survivor pension - the first thing came to my mind was do they mean we are giving away our rights to the small monthly amount a spouse receives also known as survivor benefit monthly on the death of a spouse - I have written to FSCO and they sent me a reply yesterday that they have forwarded my email to some one within the department - I am awaiting their response - no idea when they will reply. I do not understand why they make it so difficult like at the bottom of the form it states seek legal advice if necessary - so they have to now involve lawyers into this small little matter- for them to make money - I have no problem lawyers making monies on more constructive matters but heck the insurance company or FSCO should be able to quickly confirm that signing this waiver has only to do with this locked in annuity type and it does not mean one losing receiving their monthly survivor benefit if a spouse passes away - a benefit provided by the Canadian Government

February 5, 2014
11:10 pm
Loonie
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The part about telling you that you might want to consult a lawyer is there primarily because the financial institution's lawyers told them to put it there. They don't want any risk of anyone saying they didn't know what they are signing etc. and then suing them later.

March 5, 2014
9:58 am
nazirji
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I sent an email since Feb 3 to FSCO and as of today Mar 5 - no reply to what I wrote here - twice I asked them and they said the query concern has been sent to the appropriate department for a response but that it takes time - I wonder as to just what is a reasonable time frame

March 12, 2014
5:28 pm
Norman1
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Nazirji, I had a look at the Form 3 - Waiver of Joint and Survivor pension from FSCO's web site.

I'm guessing that SunLife requires the form to be signed for the transaction because

  1. the money is from a LIF locked-in account with rules that require the money to purchase a "joint and survivor pension" should the pension member have a spouse at the time the annuity is purchased, and
  2. she is trying to purchase a single life annuity instead of a joint-life one.

An inexpensive way to confirm this would be to ask SunLife if the Form 3 would still be needed if a joint-life annuity were purchased instead.

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