Government of Nova Scotia, Canada
Header - Service Directory

Use the Services Directory to quickly access information on all of the services provided by the NS Department of Finance and Treasury Board.

What is an annuity?

If you have been in a defined contribution plan, you will likely have a considerable lump sum of locked-in pension funds at retirement. If you do not wish to assume the risk of investing this money yourself, you can buy an annuity from a life insurance company. The payments under a life annuity are guaranteed, regardless of how the financial markets perform, or what interest rates are. When you purchase a life annuity, the risk of fluctuations in investment markets and interest rates is transferred to the insurance company.

When you buy an annuity, you are using the proceeds from your defined contribution plan, group RRSP, or personal RRSP to secure a defined benefit pension. The insurance company will advise you of the amount of monthly pension that can be provided with your funds. The factors that are taken into account when converting a lump sum to a pension include current interest rates, your gender and age, and the type of annuity you choose.

The main benefit of buying an annuity is that it provides a guaranteed income for the rest of your life. You will not have to worry about outliving your retirement savings.

The Income Tax Act does not permit you to keep RRSPs or locked-in retirement accounts after the end of the year in which you reach age 71. At this age, you have the option to buy an annuity with the funds in your personal RRSP.

Types of annuities

Life Annuities

Locked-In funds must be used to provide a life income. This means that payments from the annuity must continue until your death. Life annuities can include a guarantee period which ensures that payments will be made for a certain number years, even if you die.

If you have a spouse or common-law partner, your annuity must be paid in a joint and survivor form unless your spouse or partner waives this right. Joint and survivor annuities provide an income for your lifetime. After your death, a defined percentage of at least 60% of the original payment continues to be paid to your spouse or common-law partner until their death.

Annuities with guarantee periods and joint and survivor annuities cost more than non-guaranteed annuities. In other words, your lump sum will provide a lower monthly annuity payment if you chose to have a guarantee period, than it would if you chose not to have a guarantee period. If both you and your spouse or common-law partner have adequate pension funds, you might have a larger family pension income if you both waive the right to joint and survivor pensions. To waive this right to a joint and survivor pension, complete "Waiver of Joint and Survivor Pension".

Term Certain Annuities

Retirement savings that are not locked-in, such as personal RRSPs, may be used to provide an annuity that is payable for a defined term only and does not continue to be paid until your death. An annuity of this type could be used to "bridge" the period of time between your early retirement at age 55, for instance, and the start of Old Age Security and Canada Pension Plan at age 65.

Indexed Annuities

Indexed Annuities are life or term certain annuities that increase with inflation. These are more expensive than non-indexed annuities, but give you greater security because payments increase with the cost of living.

Orange ClockFor More Information

Mailing Address:
Finance and Treasury Board
Pension Regulation Division
PO Box 2531
Halifax, NS  B3J 3N5

Phone: 902-424-8915
Fax: 902-424-5327

Finance and Treasury Board
Pension Regulation Division
1723 Hollis St, 4th Floor
Halifax, NS  B3J 1V9