CSV Cash Surrender Value
DPSP Deferred Profit Sharing Plan
LIF Life Income Fund
LIRA Locked-in Retired Account
LRIF Locked-in Retirement Income Fund
OAS Old Age Security
RRIF Registered Retirement Income Fund
RRSP Registered Retirement Savings Plan
Accumulation Annuity: an annuity whereby a single premium, annual premiums or other varying
premiums are accumulated for the purpose of providing a lump sum at some point in the future. The policy holder then
has the option of rolling the lump sum into an annuity, or receiving the cash surrender value.
Amortization Schedule: the monthly payment includes interest and principal, the portions of which
change with each payment. Calculation of these two components of each payment and can be prepared with either a financial
calculator or computer software.
Annuitant: the recipient or beneficiary of an annuity. An annuity contract can have more than one
Annuity: a series of income payments or receipts made yearly or at other regular intervals.
Annuity Contract: an agreement with a financial institution or life insurance company to provide
the annuitant with an annuity. The owner of the annuity contract may or may not be the annuitant.
Cash Surrender Value (CSV): the amount returned to the policy owner when a whole life insurance
policy is cancelled. The cash surrender value is equal to the value of the policy reserve less any surrender charge. Also called
Commutation Payment: a single lump-sum payment from annuity that is equal to the present value of
the future annuity payments from the plan.
Commuted Value: is the present value of the future payments at a point in time of an annuity.
Commuting: converting an annuity to its equivalent lump sum value.
Deferred Annuity: a term or life annuity contract in which the payments do not commence until
a specific date that may be based upon the annuitant’s age. The premium for the deferred annuity can be paid in a lump
sum or as periodic payments.
Deferred Profit Sharing Plan (DPSP): a form of trust fund, registered with Revenue Canada in
accordance with the Income Tax Act, to which an employer makes contributions on behalf of its employees.
Designated Benefit: a lump-sum amount that a spouse or common-law partner, child or grandchild is
entitled to receive from a RRIF as a result of the death of the annuitant.
Eligible Amount: the portion of a designated benefit that may be transferred to the beneficiary’s
Excess Amounts: any withdrawals from a RRIF in excess of the minimum amount.
Financial Dependant: in the context of determining a designated benefit, a child or grandchild
who is considered to have been financially dependent on a deceased RRIF annuitant, if that child or grandchild’s income
in the year preceding the death of the annuitant was less than or equal to the basic personal amount as it related to
personal tax credits.
Fixed Annuity: a term of life, indexed or non-indexed annuity with the amounts of the payments
based upon a specified interest rate at the time of purchase.
Guaranteed Investment Certificates (GIC): investments purchased through banks and trust companies
for one to five years maturity and with a fixed interest rate. Also called certificates of deposit. (CD’s).
Guaranteed Premium Return Annuity: a life annuity that includes a guarantee that at least the full amount
of the initial investment or premium will be paid out before payments cease as a result of death.
Immediate Annuity: usually, an annuity that yields its first payment one month after the annuity is purchased,
although by strict definition it could take place within one year of purchase.
Indexed Annuity: an annuity that includes a provision for increased payments over time,
as a hedge against inflation.
Joint and Last Survivor Annuity: a pension that is payable to two annuitants, and that includes
a provision that payments will continue for the life of the survivor after the first annuitant dies.
Joint Life Annuity: an annuity in which it is payable to 2 people, but payments cease upon the
death of either of the annuitants.
Life Annuity: an annuity where payments are guaranteed for the duration of the lifetime of
the annuitant(s), regardless of how long (or short) a period that the annuitant survives.
Life Annuity with a Guaranteed Term: a life annuity that includes a clause that guarantees that
payments will continue for a specific period, even if the annuitant dies before the guaranteed period expires.
Life Income Fund (LIF): essentially a RRIF that receives funds from a locked-in retirement
account that provides for a life income by restricting both the minimum and maximum withdrawals from the plan.
Furthermore, property held within a LIF must be used to purchase a life annuity by age 80. Also called as locked-in
Locked-in Retirement Account (LIRA): essentially an RRSP that is established with vested pension
benefits that has a trust agreement attached to it, which restricts the use of funds to the provision of a retirement
income. Also called a locked-in RRSP.
Locked-in Retirement Income Fund (LRIF): a variation of a PRIF or LIF, available only in certain
provinces that receives funds from a locked-in retirement account and provides for a life income by restricting both the
minimum and maximum plan withdrawals. Unlike a LIF, there is no requirement to convert the amount in a locked-in retirement
income fund to an annuity at any age. Also called a locked-in RRIF.
Locked-in RRIF: see "Locked-in retirement account"
Locked-in RRSP: see Locked-in retirement Account.
Mature RRSP: an RRSP matures when it begins to provide retirement income. All plans must mature
by the end of the year in which the annuitant turns age 69.
Minimum Amount: the amount that must be withdrawn from a RRIF each year, in accordance with the
Income Tax Act beginning the year after the RRIF is established. (ITA 146.3(1).)
Non-qualifying RRIF: any RRIF that was established in 1993 or later, or one that was established prior
to 1992 that has subsequently received a transfer of property from anything other than a qualifying RRIF. (ITR 7308 (2)).
Normal Annuity: an annuity that is analogous to a loan from the policyholder to the policy provider,
where the allocation of the payments for income tax purposes between interest and principal are calculated according to an
amortization schedule, such that the early payments consist of a higher proportion of interest than later payments, as
opposed to a prescribed annuity.
Old Age Security (OAS) Program: one of three public pension benefits, which provide seniors with
a basic income guarantee.
Canada’s Old Age Security is a government program that provides all individuals who meet certain
residency requirements with universal access to a basic level of retirement income, regardless of their past employment or
income. The Old Age Security system provides a basic guaranteed level of retirement income to all qualifying Canadians.
The program includes three public pension benefits – Old Age Security (OAS), Guaranteed Income Supplement (GIS) and the
The flat rate of OAS pension is payable commencing at age 65, and it is increased quarterly to match increases the Consumer
A person must file an application with the income Security Programs division of Human Resources Development Canada in order
to receive an OAS pension. If the application is made after a person reaches age 65, the application may be approved
retroactively to age 65, up to a period of no greater than one year.
Provided that the recipient has lived in Canada for at least 20 years after reaching the age of 18, OAS payments will continue
even if that individual leaves Canada. However, if a person receiving OAS benefit does not meet this 20 year residency requirement
and he subsequently leaves Canada for six consecutive months, exclusive of the month he left Canada, then payment for any period
after six months may be suspended. Payment will resume in the month that he returns to Canada.
Prescribed Annuity: receives special consideration under the Income Tax Act because it is
assumed that the interested portion of the annuity payments are spread evenly over the life of the annuity contract,
thereby easing the tax burden on a taxpayer during the early years. This proscribed treatment is only available for
annuities purchased with non-registered funds, because the entire amount of a registered annuity is subject to tax.
The prescribed annuity offers a tax deferral and a more level source of after-tax income.
Pure Deferred Annuity: an annuity where the only benefits available are annuity payments commencing
at the end of the deferred period, which is fixed and inflexible.
Qualifying RRIF: (any RRIF that was established in 1992 or earlier, and that has had no funds or
property transferred or contributed to it at any time after the end of 1992, other that funds from another qualifying RRIF,
or a RRIF that was established after 1992 that only received funds or property from a qualifying RRIF. (ITA 7308 (2)).
Refund of Premiums: an amount received form an unmatured RRSP as a result of the death of the
Registered Annuity: an annuity purchased with registered funds.
Registered Funds: funds that are held in registered plans and that have not yet been taxed as income.
Also called tax-deferred savings.
Registered Retirement Income Fund (RRIF): essentially a trust fund that is registered with Revenue Canada,
for the purpose of providing the annuitant with a retirement income.
Registered Retirement Savings Plan (RRSP): a trust set up in accordance with the Income Tax Act, to hold
certain investment assets intended for retirement income.
Risk Tolerance: the degree of risk that a client is prepared to take in investing funds to meet
a specific objective.
Segregated Funds: a portfolio of financial assets that are held in trust by an insurance
company for the beneficiaries. The term, “segregated”, refers to the fact that, unlike the accumulating funds
for some insurance policies, these funds are kept separate or segregated from the assets of the insurance company.
The segregated fund is taxed as an inter vivos trust and elects under Section 104(6) of the Income Tax Act to have
all of its taxable income flow through to the beneficiaries of unitholders. Segregated funds are primarily designed
to provide a more flexible alternative for investing the accumulating fund of a life insurance policy. A segregated
fund cannot be part of the exempt accumulating fund for a life insurance policy. Rather it is a trust. The investment
income is taxable to the policyholders whether or not any amounts have been paid to the policyholder by the trust.
The income retains its nature as it flows through to the policyholders and is taxable as capital gains, capital
losses, dividends eligible for the dividend tax credit and other forms. A segregated fund, unlike a mutual fund,
flows a capital loss through to the fund owner. The disposal of all or part of the interest in a segregated fund
can give rise to a capital gain or loss. Also called seg fund.
Single Life Annuity: a life annuity that terminates payments upon the later of the death of
a single beneficiary and the end of any guaranteed term.
Spousal RRIF: any RRIF that received payments or transfers of funds or property, either directly or
indirectly, from a spousal RRSP.
Spousal RRSP: any RRSP established for the benefit of a taxpayer’s spouse or common-law partner and where
the contributions are made and deducted by the taxpayer.
Straight-life Annuity: a pension that is payable as an annuity for the life time of the member, with no
further benefit after the member dies.
Successor Annuitant: if the taxpayer is the annuitant of a RRIF, he can elect to have payments
from the RRIF continue to his spouse or common-law partner after his death. He can make this election either in the
RRIF contract, or in his will. If he makes this election, then his spouse or common-law partner will become the successor
annuitant of the RRIF after his death, and she will have to report the resulting payments as income in the year in which
they are received.
Survivorship Annuity: an annuity that is payable during the lifetime of one individual, but
only after the death of another designated individual.
Term Annuity: a contract for the annuitant to receive regular and periodic payments for a specified
period of time or term.
Term Certain Annuity: a term annuity that includes a guarantee that the payments will be made for
the full term, even if the annuitant dies before the term expires.
Unmatured RRSP: an RRSP that has not started to pay a retirement income.
Unregistered Annuity: an annuity purchased with unregistered funds.
Unregistered Funds: funds that are in the hands of the beneficiary. Also called non-tax-deferred
savings or tax-paid capital. (i.e., funds that have already been subject to income tax).
Variable Annuity: a contract under which the annuitant receives a periodic payment for a term or
for life and the amount of the payment fluctuates in accordance with the earnings of an invested amount.