The GMWB ensures that your client receives a guaranteed and predictable retirement income over a specified period. It thus offers protection against market downturns while taking advantage of market upturns, for an active retirement.
- Annual income of 7%
- An annual GMWB Bonus of 7% each year no withdrawals are made, for the first ten years
- Reset of the GMWB Net Protected Value every year if the markets are up
- 100% of the Deposits recovered
- Funds from all asset classes
How it works
Example – How the GMWB works
Combining the GMWB with the Helios Core Guarantees
Eligible Funds
Important definitions
How it works
The GMWB guarantees that the total amount available at the time it is added to the Contract (GMWB Protected Value, plus any GMWB Bonuses the client received) can be withdrawn for a period of a minimum of 15 years, as follows:
- 7% a year for the first 14 years
- 2% in the 15th year
If the client decides to withdraw less than the 7% maximum (or if the GMWB Protected Value is adjusted upwards), the GMWB Withdrawal Period will be extended beyond 15 years. Clients will always get back at least 100% of their Deposits.
GMWB Bonus
By adding the GMWB to the Contract, your client will receive a GMWB Bonus, each year no withdrawals are made, for the first ten years. This annual GMWB Bonus is equal to 7% of the GMWB Bonus Base and is added to the:
- GMWB Protected Value prior to the GMWB Exercise Date; or
- GMWB Net Protected Value after this date
This GMWB Bonus therefore increases the income available to the client during the GMWB Withdrawal Period.
GMWB Exercise Date
Clients can exercise the GMWB three different ways:
- By requesting their first withdrawal
- By announcing their intention to exercise the GMWB even if they don’t make a withdrawal (for example, if the markets are high and they want to lock in the GMWB Protected Value)
- By partially redeeming Units held in the Contract
When GMWB is exercised, if the Market Value of the Contract is higher than the GMWB Protected Value, the Market Value will be used to determine the GMWB Maximum Amount to which the client is entitled.
Reset of the GMWB Net Protected Value (after the GMWB Exercise Date)
Every year, the GMWB Net Protected Value is compared to the Market Value. If the Market Value at that time is higher than the GMWB Net Protected Value, the latter will be reset to the Market Value.
When the GMWB Net Protected Value is adjusted upwards, the increase will be allocated to the remaining GMWB amounts available in the following order:
- Increase to the GMWB Maximum Amount available for the last GMWB Year, up to 7% of the GMWB Net Protected Value in effect.
- Extension of the GMWB Withdrawal Period.
- If the GMWB Net Protected Value is greater than the GMWB Protected Value calculated for January 1 of the next GMWB Year, the GMWB Maximum Amount is recalculated for a new 15-year period.
Impact of withdrawals on maturity and Death Benefit guarantees
Regardless which Core Guarantee is chosen (Guarantee 75/75, Guarantee 75/100 i or Guarantee 100/100 r), it remains valid until all the capital has been repaid to the client. Each withdrawal under the GMWB reduces the Maturity and Death Benefits prorated to the Units withdrawn.
Excess payments
If a client withdraws more than the GMWB Maximum Amount, then the GMWB Protected Value, GMWB Net Protected Value and GMWB Base Bonus will be adjusted. These adjustments are calculated based on the proportion between the higher withdrawal and the Market Value of the Contract just before this withdrawal, rather than on the Market Value only. This calculation method is more favourable for the client.
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Example |
|
|
Maximum GMWB Amount |
$7,565 |
|
Excess payment |
$4,000 |
|
Market Value at time of withdrawal |
$91,435 |
|
Protected Value |
$108,070 |
|
Net Protected Value |
$100,505 |
Adjustment Formula
Value after withdrawal = value before withdrawal X (1 – (Excess payment/Market Value before adjustment)
GMWB Bonus Base after withdrawal = 101,000 X (1 – 4,000 / 91,435) = 96,582$
GMWB Protected Value after withdrawal = 108,070 X (1 – 4,000 / 91,435) = 103,342$
GMWB Net Protected Value after withdrawal = 100,505 X (1 – 4,000 / 91,435) = 96,108$
This adjustment will reduce the GMWB Maximum Amount for the following years until the end of the GMWB Withdrawal Period, but won't deplete the GMWB Withdrawal Period more rapidly.
Example – How the GMWB works
The following graph illustrates how a GMWB is set up, with resets at different stages and the impact of these resets on Richard’s Contract. Richard, age 50, will be retiring in about ten years.
*All amounts allocated to a DFS GIF are invested at the risk of the contract holder and may increase or decrease in value.
This graph simulates the addition of a GMWB with an initial Deposit of $100,000 at the maximum rate of 7%, and the impact of Bonuses and resets following a rise in the Market Value. This simulation is neither an indication nor a guarantee of future results.
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1. |
GMWB Election Date = GMWB Exercise Date
GMWB Protected Value and GMWB Bonus Base = $100,000 |
|
2. |
GMWB Bonus = 7% X GMWB Bonus Base ($100,000) = $7,000 |
|
3. |
Annual Reset
GMWB Protected Value = Market Value ($125,000) + GMWB Bonus ($8,750) |
|
4. |
Start of Withdrawals
GMWB Net Protected Value = GMWB Protected Value = $195,000
(Market Value = $176,432) |
|
5. |
Annual Reset
The GMWB Net Protected Value is increased to the Market Value = $85,275
Addition of 2 GMWB Years |
|
6. |
Reset of GMWB Net Protected Value adds 2 payout years for Richard. |
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7. |
GMWB Maximum Amount = $13,650 |
Combining GMWB and Core Guarantees
|
Core guarantees |
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For whom? |
|
Guarantee 75/75 |
+ GMWB = |
Retirees who are mainly concerned about maximizing their income during their active retirement years. |
|
Guarantee 75/100 i |
+ GMWB = |
Retirees who want to maximize their income and are concerned about protecting their loved ones’ purchasing power. |
|
Guarantee 100/100 r |
+ GMWB = |
Retirees who want to ensure they are 100% protected at all times and at the same time benefit from a maximum amount of income. |
GMWB Eligible Funds
At all times that the GMWB applies to your client's Contract, only Units of GMWB-Eligible Funds may be attributed to the Contract.
Portfolios of Funds
- DFS GIF – Diversified Income – Quotential
- DFS GIF – Balanced Income – Quotential
- DFS GIF – Balanced Growth – Quotential
- DFS GIF – Balanced Growth – Northwest Quadrant
- DFS GIF – Growth – Quotential
- DFS GIF – Ultimate Equity – Multi-managers
Individual Funds
Income
- DFS GIF – Money Market
- DFS GIF – Income – Fiera
- DFS GIF – Canadian Bond – Addenda
- DFS GIF – Global High Income – Multi-managers
- DFS GIF – Growth and Income – Northwest
Balanced and Income Allocation
- DFS GIF – Global Balanced – Jarislowsky Fraser
- DFS GIF – Balanced Growth – McLean Budden
- DFS GIF – Canadian Balanced – Fidelity
- DFS GIF – Canadian Balanced – Fiera
- DFS GIF – Canadian Balanced – Bissett
Canadian Equity
- DFS GIF – Dividend Income – Bissett
- DFS GIF – Canadian Dividend – Fiera
- DFS GIF – Canadian Equity – Jarislowsky Fraser
Foreign Equity
- DFS GIF – Global – Fidelity
- DFS GIF – Global Equity – AllianceBernstein
For more information onf the above funds, consult the Product Description section.
Important definitions