What are segregated funds?

Investment returns are important, but so is financial security. Whether you’re new to investing or looking to diversify your portfolio, segregated funds offer security and the potential for growth by guaranteeing all or most of your principal investment upon maturity or death.

How are segregated funds and mutual funds different?

Segregated funds and mutual funds share some key benefits. They’re both professionally managed investment funds that pool financial contributions from investors and both can be invested in a variety of products.

The main difference between the two is that only life insurance providers can offer segregated funds. The funds are held separately from the general assets of the life insurance company, which is why they’re called “segregated.”

Segregated funds also come with powerful guarantees that mutual funds generally don’t offer. Depending on the level of protection you choose, 75% to 100% of your principal investment is guaranteed when the contract matures or upon your death. Having a guarantee like this makes it easier to weather the ups and downs of the financial market and stay on course.

Find out more about segregated funds vs mutual funds and try our investment calculator.

What types of investments can you make with segregated funds?

You have a variety of options, including:

Are there retirement benefits?

Whether you’re getting ready to retire or you’re already there, you can protect your hard-earned money. Segregated funds feature benefits that make estate transfer seamless and easy for your beneficiaries. With segregated funds, your assets can be paid directly to a named beneficiary with no costly probate fees.*

Not sure how much you need for a comfortable retirement? Try our Retirement savings and planning calculator.

How can segregated funds help business owners?

If you’re an entrepreneur, you put incredible amounts of time and effort into growing your business. Fortunately, segregated funds may protect your personal savings from creditors.** When you invest in segregated funds through a non-registered or registered account and name a preferred beneficiary***, you can help secure everything you’ve worked so hard to earn for your family.

Who can buy segregated funds?

Many Canadians think you need to be 65 years or older to buy segregated funds, but that’s not true. Segregated funds are sold exclusively through life insurance companies, or a licensed insurance advisor, and they’re available for all Canadian adults.

By investing in segregated funds, you can feel secure with powerful guarantees behind your money and take advantage of growth potential to add to your existing investments. You’ll get the capital protection, versatility and privacy that only segregated funds can provide.

What are you saving for? Watch this video to learn more.

*After someone dies, their estate is subject to probate, which is the legal validation of their will. Probate or estate administration fees can be as much as 1.5% of the estate in some provinces. During probate, assets are frozen. Bypassing probate not only saves up to 1.5% of assets, it also relieves the burden on family of having to possibly go through a lengthy and complicated process to access funds.

**Conditions apply, and creditor protection is not guaranteed. You should consult legal and/or tax advisors to ensure that any action you take in relation to this information is appropriate to your specific situation.

***The allowable family beneficiaries of the annuitant creditor protection are set out in most provinces’ legislation (other than Quebec) and are as follows: spouse, child, grandchild, parent.