Understanding Copycat Annuity

By Bruce Youngblud, CFP, CIM

The copycat or mirror annuity is a popular choice for employees coming out of a defined benefits pension plan. Whether you are retiring or being terminated, you can receive the same pension from a Canadian insurer that your employer promised you. 

For example, let’s say you are entitled to $3,500 per month for life plus a bridge payment of $800 per month to age 65. Also, your spouse will have a reduced pension should you die first.Revenue Canada will allow you to move that pension to a Canadian insurance company who will provide you the same pension, same bridge and the same spousal pension.

Why consider this?

The question to ask yourself is not whether the pension is currently fully funded. The question is, will my company be financially healthy in 25 or 30 years. Like it or not, you’re going to live a long time. Don’t wake up at age 82 to find that you will see a reduction in monthly pension income.

So, the insurance company is going to pay you for the rest of your life.

They are going to match your company pension dollar for dollar.

The insurer will match the bridge and the spousal pension. In fact, Revenue Canada only allows this option if it is a mirror.

Furthermore, I have handled cases where the departing employee additionally received a cheque of $5,000 or $10,000. This is surplus money that your employer sends to the insurer which isn’t needed in order to copycat.

All income from your employer pension or copycat is taxable income. There is no difference in taxation between these two options.

I’m happy to discuss with you one on one or in a group. Please have your pension estimate statements or your final offer statements ready.

Feel free to phone the office. My assistant Kennedie will be happy to arrange a time.

Bruce Youngblud, CFP, CIM 

Bruce Youngblud is a known pension expert in southern Ontario who specializes in helping individuals prepare for retirement. He advises clients on Canada pension plans, auto worker pensions, government pensions, tax planning, and estate planning. Schedule a 15-minute call here with one of our Certified Financial Planners!

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