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Annuity
An income plan purchased from an insurance company to generate regular income payments during retirement. Annuities may be purchased with funds from both registered and non-registered savings vehicles. Payments may be made at a level or indexed amount and may continue for a guaranteed period after the annuitant's death.
Book Value
For Guaranteed Interest Accounts (GIAs), the deposit amount plus the interest earned to the date when the value is calculated.
Bonds
Bonds are a promise made by a government or corporation to repay a loan – with interest – at a specified date in the future. By investing in a bond, you loan money to a government or corporation in exchange for future repayment of the original amount plus interest.
Continuous Service
The period during which a staff member works for the same employer on an uninterrupted basis. This may be defined in a pension plan (or by law) to include certain periods of absence, and service with an associated or previous employer.
Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) provides a monthly taxable benefit to retired contributors in all provinces except Quebec. You must apply to receive benefits. See also Quebec Pension Plan. For more information please go to www.servicecanada.gc.ca
Equity Funds
Funds that invests primarily in common shares of Canadian companies. While the fund may hold stock of small companies, the fund primarily invests in medium to large companies as represented by the Toronto Stock Exchange 300 Index.
Fixed Income
Fixed income refers to any type of investment that yields a regular (fixed) payment. For example, if you borrow money and have to pay interest once a month, you have issued a fixed income security.
Inflation
The inflation rate – or rising cost of living – reflects the reduction in the purchasing power of a dollar over time. The reduction corresponds to the increase in prices over the same period.
Investment Management Fee (IMF)
An Investment Management Fee (IMF) is the fee collected by Manulife to cover the cost associated with investment management and administrative expenses. The fee is deducted from the fund before unit values are calculated.
Life Income Fund (LIF)
An LIF provides an individual with income during his or her retirement years. This income product is funded by savings that originate from an RPP and are locked-in by pension legislation.
An LIF is similar to a Registered Retirement Income Fund (RRIF), with two key differences:
1. In addition to a minimum annual withdrawal requirement, an LIF also has a maximum annual withdrawal.
2. In some provinces the LIF must be converted to a life annuity at age 80.
Locked-In Retirement Account (LIRA)
An LIRA (in some provinces a Locked-In RRSP) is essentially the same as an RRSP; however, only locked-in pension funds can be accepted into this account. In addition to purchasing a life annuity with the funds, the owner may transfer funds from a LIRA to an RPP (if applicable), to another LIRA, to an LIF, or to an LRIF.
Locked-In Retirement Income Fund (LRIF)
An LRIF provides an individual with income during his or her retirement years. It is designed to hold locked-in savings from an RPP. LRIFs are only available in a certain provinces.
An LRIF is similar to an LIF with two key differences:
1. The maximum withdrawal amount is calculated differently.
2. There is no requirement to buy a life annuity at age 80.
Locked-In Registered Retirement Savings Plan (RRSP)
An RRSP that holds locked-in retirement savings. Locked-in money must be used to purchase an annuity, a Locked-in RRSP.
Market Value
For a guaranteed investment, the rate at which an investment of the same term could be purchased in the current market. If the prevailing rates are higher than the rate originally earned by an investment of the same term, the market value will be lower than the book value (the amount for which an investment originally purchased could be sold). If the prevailing rates are lower, the market value will be higher than the book value. For a market-based investment, the current amount for which a unit may be purchased or for which a unit may be sold.
Maturity Date
The date on which the principal amount of a note, draft, acceptance, bond or other debt instrument becomes due and is repaid to the investor. Interest payments stop on that date. It is also the termination or due date on which an instalment loan must be paid in full.
Money Market Fund
A Money Market fund invests in high-quality, short-term income securities. By investing in fixed income securities, the fund is essentially making a short-term loan to a government or corporation and earning interest on that loan. Money Market funds are typically managed to maintain liquidity (to be easily cashed), to protect the initial investment and to provide a moderate level of income.
Old Age Security (OAS)
The Old Age Security (OAS) pension is a monthly payment available to Canadians age 65 and older who apply and meet certain requirements. Unlike CPP, it is not dependent on a person's employment history and a person does not need to be retired from a job to qualify.
Pension Committee
A plan sponsor may delegate a Pension Committee to make administrative recommendations in regards to an RPP. A Pension Committee holds regular meetings and are delegated administrative duties such as providing investment information and decision-making tools to members, introducing the plan to new members, providing ongoing communications to members, maintaining the plan, plus ensuring deposits and benefits payable to members are made in accordance with the terms of the plan.
Portability
The right of a member who terminates his or her employment before retirement to transfer pension benefits to another RPP, a locked-in RRSP, or LIRA.
Portfolio
A variety of investments held by an individual or institution.
Quebec Pension Plan (QPP)
Similar to the Canada Pension Plan (CPP) this retirement income program is offered for residents of Quebec.
Rate of Return
Rate of Return is calculated by comparing the original amount of an investment to the value of the investment at the end of a specified period.
Each member's personal rate of return is calculated monthly by taking into consideration opening balance, closing balance, and any transactions made during the month. Each monthly rate of return is then 'linked' to generate a rate of return for a specific reporting period. For example, on June 30 of a given year, a 'Since January 1' rate of return is calculated by linking personal rates of return for January through June.
Registered Pension Plan (RPP)
A pension plan is usually established by an employer on behalf of its employees to provide for their retirement. With a defined contribution plan, the amount of the employer and employee contributions is fixed while the savings are accumulating, and the actual value of the pension is not known until retirement.
Registered Retirement Income Fund (RRIF)
An RRIF is tax-sheltered plan for registered savings that provides regular income payments during retirement. A minimum payment must be made to the RRIF holder each year. The RRIF holder is also permitted to withdraw amounts beyond the minimum.
Registered Retirement Savings Plan (RRSP)
An investment account that allows individuals to defer tax on contributions made to the plan. Income tax is deferred until the money (the amount originally deposited plus any investment earnings made on that money) is withdrawn.
Unit Value
An amount based on the market value of an investment vehicle: the total value on a specific day of all the assets held in a particular fund, less any liabilities (including IMFs), divided by the total number of units currently held by the fund's investors. The unit value (the price of one piece of that fund) will increase or decrease on each market day since the value of the securities in the fund's portfolio changes daily.
Volatility
The tendency of a fund's value to increase and decrease over time. The value of a fund with high volatility will increase and decrease more dramatically over time than the value of a fund with low volatility.
Yield
In general, yield is the annual rate of return for any investment and is expressed as a percentage.