Fee Free Periodic Payments

2 Fee-free redemption? Yes, it's possible!  Periodic payments from a RRIF or a LIF are exonerated from market value adjustment up to a maximum of:  20% of the contract value per year (which includes all products)  of which 12% can come from SIP, TIP and Alternative Allocation Portfolio

3 Redemption rules  To calculate the maximum periodic payments from a RRIF or a LIF, we use:  % of the initial deposit value for the 1 st year  % of the current value as at January 1 for subsequent years  Non-cumulative

4 Redemption rules…  Product priority order 1.Daily Interest Account 2.Guaranteed Interest Account 3.SIP / TIP / AAP 4.Special daily interest account (pending a transfer)  Within each product category, the FIFO method is used (first in, first out):  According to deposit dates (campaign dates) (the terms are not taken into consideration)

5 Example 1 January 1, 2004$5,000Initial deposit in a 5-year GIA $25,000Initial deposit in a 3-year SIP $30,000Initial deposit in a 8-year TIP Total investment on Jan 1, 2004 = $60,000 This simulation is not an indication or a guarantee as to future results.

6 Example 1: six months later… July 1, 2004 $5,087.50Current value of 5-year GIA $25,575Current value of 3-year SIP $30,930Current value of 8-year TIP What is the maximum the client can redeem fee free? 20% of the initial deposit of $60,000 = $12,000

7 Example 1: Where will the $ come from?  Step 1: the maximum amounts that can be redeemed from each product are calculated  Step 2: the payments are made according to the product priority rules and FIFO

8 Example 1… Step 1: maximum calculated for each product Max for 5-year GIA Total maximum $12,000, but the GIA current value is only $5, Max for 3-year SIP 12% x $25,000 = $3,000 Max for 8-year TIP 12% x $30,000 = $3,600

9 Example 1… Step 2: payments made according to product priority rule and FIFO Redeem the max from GIA$5, (current value) Redeem the max from SIP & TIP SIP = $3,000 TIP = $3,600 Total amount redeemed = $11,687.50

10 Example 2: three years into a contract Product Current value (As of Jan 05) Details of deposits and/or campaigns Daily interest $2,000 GIA$16,800 1)Deposit of $8k in Jan 03 ($8,712) 2)Deposit of $8k in Jan 02 ($8,088) SIP$33,705 1)Deposit of $20k in Jan 02 campaign ($22,720) 2)Deposit of $10k in Jan 03 campaign ($10,985) TIP$48,995 1)Deposit of $15k in Jan 03 campaign ($16,340) 2)Deposit of $30k in Jan 04 campaign ($32,655) Total current value = $101,500

11 Example 2… What is the maximum the client can redeem fee free? 20% of current value $101,500 = $20,300 Suppose that the client wants a periodic payment of $22,000, then $1,700 will be with fees

12 Example 2… Step 1: maximum calculated for each product Max for DIA & GIA Total max $20,300, which has to be split among DIA & the two GIAs Max for Jan 02 SIP12% x $22,720 = $2,726 Max for Jan 03 SIP12% x $10,985 = $1,318 Max for Jan 03 TIP12% x $16,340 = $1,961 Max for Jan 04 TIP12% x $32,655 = $3,919

13 Example 2… Step 2: payments made according to product priority rule and FIFO Redeem the max from DIA DIA = $2,000 (current value) Redeem the max from GIA GIA = $16,800 A)Jan 02 GIA = $8,088 B)Jan 03 GIA = $8,712 Redeem from SIP & TIP A) Jan 02 SIP = $1,500 (fee free) B) Jan 02 SIP = $1,700 (with fees) Total amount redeemed fee free = $20,300 Total amount redeemed with fees = $1,700 Which completes the periodic payment of $22,000