The Canadian Council of Insurance Regulators (CCIR) and the Canadian Insurance Services Regulatory Organizations (CISRO) announced that contributions, including pre-authorized chequing contributions (PACs), into deferred sales charge (DSC) options of a segregated fund contract will no longer be accepted.
To comply with this change and in keeping with Canada Life’s commitment to support you and your clients in an evolving regulatory environment, we’re making changes for certain policies with DSC options, effective May 12, 2023.
- Impacts to Canada Life Segregated Funds policies
- Action Required
- For Canada Life Segregated Funds policies
- For Canada Life Generations, Generations Core, Generations I and Generations II policies
- Frequently asked questions
Impacts to Canada Life Segregated Funds policies
|
|
|
|
|---|---|---|
|
Impacted products |
Canada Life Segregated Funds policies |
Policies where DSC* is the only sales charge option available, including:
*This includes back-end load (BEL) options. |
|
|
|
|
|
|
|
|
Contact wealthhocommunication@canadalife.com to request a list of your impacted clients. Please include your name, advisor code and office.
Connect with your clients who have active PACs going into DSC options in their policy to determine if this is still a suitable option. If they want to move their PAC contributions currently going into DSC to a sales charge option other than FEL 0%. If they do, you need to provide alternate instructions to Canada Life by April 28, 2023. Use the pre-authorized contribution form Subsequent premium (46-5959).
- Review the client DSC contribution disclosure formOpens in a new window with your client before accepting any DSC contributions and be prepared to discuss alternative policy and sales charge options. Canada Life is providing the disclosure to clients who have active PACs. You will need to provide the disclosure to clients who want to make non-scheduled contributions or new PACs. You must document in your client file that this disclosure was provided, where applicable, for audit purposes.
- Use the Product comparison document to compare the features of our older segregated funds products to our current Canada Life Segregated Funds product to help determine if a new policy is more suitable for your client for future contributions.
Existing contributions into DSC options aren’t impacted. These contributions remain subject to redemption charges if redeemed during the redemption charge period.
For Flex and Emperor policies the disclosure isn’t required.
Intact transfers from registered savings to registered income policies aren’t impacted by the changes to DSC options. DSCs aren’t charged on the source policy; any existing DSC schedule is carried over to the target policy. Please refer to the Transfer Guidelines for further details.
We have no plans to waive the DSC fees on existing segregated fund policies.
No, you cannot transfer any DSC units to chargeback. This is to ensure we provide upfront sales compensation only once for a given invested amount. Please refer to transfer guidelines for more information.
These options vary depending on the client’s existing policy. Refer to the information folders for more information.
Canada Life is proactively implementing changes to DSC options effective May 12, which coincides with the spring release of segregated funds forms, applications, contracts, information folder and fund facts documents.
“DSC” includes the deferred sales charge (DSC) option, low-load deferred sales charge (LSC) option and back-end load (BEL) option.
- FEL 0% mirrors what was done for mutual funds when similar regulations stopping DSC contributions were applied there.
- FEL with 0% upfront commission was chosen as it would ensure that the client’s contributions were fully invested into the policy without any up-front load being deducted.
- Some advisors have chosen to not incorporate the chargeback option into their practices, so we didn’t want to default to chargeback (where available).
Approach: Stop all new money into DSC options effective May 12, 2023
Yes, clients can choose to put future PAC amounts into CB options, where available. However, CB2 is not available until May 12, so until May 11, the only chargeback option is CB4.
Approach: Stop all new money into DSC options effective May 12, 2023
Due to the volume of changes required to remap all impacted PACs and to ensure that the changes are applied by May 12, we’re asking for the updated instructions by April 28. Updated instructions received between April 28 and May 12 will be handled on a best-efforts basis.
We highly discourage starting new PACs into DSC options between now and May 12. Doing so would require additional notifications to the client who may reach out to you with questions about instructions that were recently submitted.
Approach: Stop all new money into DSC options effective May 12, 2023
Your Operations Specialist will deposit the premiums into the FEL 0% option of the fund(s) and notify you of this transaction.
Approach: Stop all new money into DSC options effective May 12, 2023
We've focused our efforts and resources on a single, go-forward product post-amalgamation into one company, so that we can be the most productive.
Approach: Stop all new money into DSC options effective May 12, 2023
Starting May 12, new online banking contributions will go to FEL 0% money market, and we’ll send you an email to let you know a switch can be processed to the funds as chosen by you and your client.
Approach: Stop all new money into DSC options effective May 12, 2023
“DSC” includes the deferred sales charge (DSC) option, low-load deferred sales charge (LSC) option and back-end load (BEL) option.
As of May 12, you must provide this form to your client, or their Power of Attorney, prior to accepting the following contributions into policies where DSC is the only sales charge option:
- New PAC contributions
- Restarting a PAC
- All non-scheduled contributions
Canada Life will provide the DSC contribution disclosure annually for existing PACs.
For Flex and Emperor policies the disclosure isn’t required.
Approach: Contributions can continue, provided required disclosure is provided
Our current position on future contributions to policies where DSC is the only sales charge option is subject to final regulatory and provincial approvals. We’re working with regulators to understand what this will look like and will provide further details as soon as possible if our direction on this changes.
We’re not allowed to accept a contribution until the DSC contribution disclosure is provided to clients. You must document in your client file that this disclosure was provided, where applicable, for audit purposes.
No client signature is required for the DSC contribution disclosure.
The following forms will be updated to provide acknowledgement the client was provided the DSC contribution disclosure form. Using the appropriate forms will ensure transactions are in good order and there are no delays in processing. The form date will reflect 5/23.
- Change form – Premiums (46-5959)
- TARI (5436 CAN)
- TANRI (46-10158)
- Change form – Premiums – Gens & EP (153CAN)
If you meet with clients before the new forms are released, we’ll accept it or a letter of direction. The following wording to be must included, otherwise the contribution will be considered not in good order:
“I/We acknowledge receipt of the DSC contribution disclosure form.”
Approach: Contributions can continue, provided required disclosure is provided
Our current position on future contributions to policies where DSC is the only sales charge option is subject to final regulatory and provincial approvals. We’re working with regulators to understand what this will look like and will provide further details as soon as possible if our direction on this changes.
No, we've focused our efforts and resources on a single, go-forward product post-amalgamation into one company, so that we can be the most productive.
Approach: Contributions can continue, provided required disclosure is provided
Our current position on future contributions to policies where DSC is the only sales charge option is subject to final regulatory and provincial approvals. We’re working with regulators to understand what this will look like and will provide further details as soon as possible if our direction on this changes.
If a client transfers an entire non-registered policy, any redemption or transfer is a taxable disposition and may result in a capital gain or capital loss that will be reported to the client on their next tax slip. For registered policies, this type of redemption is a tax-free registered transfer. Transferring an entire policy will impact clients’ guarantees and may result in redemption charges. The features available within the existing policy may differ from the features in the new policy. Refer to the segregated funds Product comparison documentOpens a new website in a new window for more information.
Approach: Contributions can continue, provided required disclosure is provided
Our current position on future contributions to policies where DSC is the only sales charge option is subject to final regulatory and provincial approvals. We’re working with regulators to understand what this will look like and will provide further details as soon as possible if our direction on this changes.
Yes. You can continue to use a TA for new contributions to policies where DSC is the only option as long as:
- you provided your client with the DSC contribution form.
- you added a note to the applicable form and to your client file indicating that the DSC disclosure form was provided to the client prior to accepting the contribution.
Approach: Contributions can continue, provided required disclosure is provided
Our current position on future contributions to policies where DSC is the only sales charge option is subject to final regulatory and provincial approvals. We’re working with regulators to understand what this will look like and will provide further details as soon as possible if our direction on this changes.
“DSC” includes the deferred sales charge (DSC) option, low-load deferred sales charge (LSC) option and back-end load (BEL) option.