Segregated Fund

How to make the best of segregated funds

Segregated funds, also known as seg funds, are specific insurance products in which your funds are invested in underlying assets such as mutual funds for example. Segregated funds differ from mutual funds, however, in that they have a built-in guarantee for either all or part of your investment, potentially offering a more secure option. Generally speaking, you need to have held the investment for a minimum of ten years for this protection to apply and it often costs extra to benefit from this guarantee. You should also be aware that if you withdraw your funds before the maturity date, you will lose this protection and will only receive the current market value of your investment minus applicable charges.

The difference between retail and group retirement plan segregated funds

Often, workplace pensions constitute segregated funds but they work slightly differently to retail segregated funds that you purchase yourself. They usually do not come with the insurance guarantee, nor do they charge such high fees, though they do offer the potential for creditor protection and the possibility of excluding probate fees where applicable.

Here are some of the pros and cons of investing in segregated funds:

Advantages

  • As mentioned above, one of the main benefits is the fact that between 75% and 100% of your investment is protected,as long as you abide by the rules relating to withdrawalsi.e.: your funds must be held for a particular length of time.
  • In addition, many products offer you the opportunity to allow your beneficiaries to receive between 75% and 100% of the contributions that you have made in the event of your death. What’s more, as long as your beneficiaries are named in the contract, they will not pay probate fees.
  • Many funds also offer creditor protection which is useful for those who run their own business.

Disadvantages

  • You will often pay higher management fees for segregated funds compared with mutual funds, due to the added insurance and protection that they offer.
  • You are likely to be penalised if you withdraw your funds before the contract maturity date. Specifically, you will often pay a withdrawal fee and will also not benefit from the protection guarantee. To avoid this, you usually have to keep your monies invested for ten years.

Latest News

Comparing TFSAs and RRSPs - 2020

We examine the difference between RRSP and TFSA in the deposit and withdrawal stage.

RRSP Tax Savings Calculator for the 2019 Tax Year

The 2019 RRSP Tax Savings Calculator

2020 Financial Calendar

Financial Calendar for 2020- All the deadlines you need to know to maximize your benefits!

Business Owners: 2019 Tax Planning Tips for the End of the Year

If your corporate year end is December 31, it’s a great time to review your business finances. With the federal election over and no major business tax changes for this year, 2019 is a good year to make sure you are effectively tax planning. Please keep in mind that your business may be affected by the recent tax on split income (TOSI) and the passive investment income rules given they came into effect in 2018. These rules can be complicated, please don’t hesitate to consult us and your accountant to determine how this can affect your business finances.

2019 Tax Tips for Employees

Now that we are nearing year end, it’s a good time to review your finances. With the federal election over and no major tax personal tax changes for this year, 2019 is a good year to make sure you are effectively tax planning.

Financial Planning for Incorporated Professionals

Financial planning for incorporated professionals is often two-sided- planning for the practice and personal financial planning.

Succession Planning for Business Owners

Business owners deal with a unique set of challenges. One of these challenges includes succession planning. A succession plan is the process of the transfer of ownership, management and interest of a business. When should a business owner have a succession plan? A succession plan is required through the survival, growth and maturity stage of a business. All business owners, partners and shareholders should have a plan in place during these business stages.

Retirement Planning for Business Owners Infographic

Retirement planning for business owners. An infographic checklist.

Estate Planning for Business Owners

What happens when the children grow up and they are no longer dependent on their parents? What happens to your other "baby"- the business? Estate planning for business owners deals with the personal and business assets.