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

Retirement Planning for Business Owners - Checklist

As a business owner, one of your challenges is learning how to balance between reinvesting into the business and setting money aside for personal savings. Since there are no longer employer-sponsored pension plans and the knowledge that retirement will come eventually, it’s important to have a retirement plan in place. We've put together an infographic checklist that can help you get started on this.

Canada Emergency Wage Subsidy expanded to include more businesses!

On July 17th, Finance Minister Bill Morneau announced proposed changes to the Canada Emergency Wage Subsidy (CEWS) that will expand the number of businesses that qualify for the program.

Canada Emergency Wage Subsidy extended into December!

On July 13th, Prime Minister Justin Trudeau announced the extension of the Canada Emergency Wage Subsidy (CEWS) until December.

Insurance Planning for Business Owners

For business owners, making sure your business is financially protected can be overwhelming. Business owners face a unique set of challenges when it comes to managing risk. Insurance can play an important role.

CERB Extended | Business Owners who did not qualify previously - expanded CEBA starts June 19th

Great news for Canadians out of work and looking for work. The CERB will be extended another 8 weeks for a total of up to 24 weeks. The expanded CEBA will begin June 19th.

Insurance Planning for Young Families

For young families, making sure your family is financially protected can be overwhelming, especially since there’s so much information floating online. This infographic addresses the importance of insurance- personal insurance.

Small Businesses! Applications for Canada Emergency Commercial Rent Assistance starts May 25th

The Application portal for the Canada Emergency Commercial Rent Assistance (CECRA) opens at 8:00am EST on May 25th

Expanded eligibility for CEBA $40,000 interest-free loan

The Prime Minister outlined the expanded eligibility for the Canada Emergency Business Account and highlighted companies such as hair salon owners, independent gym owners with contracted trainers and local physio businesses will now be eligible. "If you are the sole owner-operator of a business, if your business relies on contractors, or if you have a family-owned business and you pay employees through dividends, you will now qualify." - PM Justin Trudeau

Apply starting Friday for Canada Emergency Student Benefit! Help on the way for seniors.

The Canada Emergency Student Benefit (CESB) provides financial support to post-secondary students, and recent post-secondary and high school graduates who are unable to find work due to COVID-19.