10.3 Ongoing Service: Reviews, Switches, Resets, Withdrawals & Terminations
Key Takeaways
Service starts with follow-up after the sale and continues with scheduled and annual reviews, plus reviews when the client's circumstances or the product change.
A fund switch in a non-registered contract is a taxable disposition, may be free only up to a set number per year, can trigger short-term trading fees, and in some contracts acts as a reset that moves the maturity date.
Changing a revocable beneficiary needs only the owner's signature; changing an irrevocable beneficiary needs that beneficiary's written consent.
At maturity the contract can be renewed for a new term, converted into an annuity or paid out, with any top-up credited automatically.
A group member who leaves the employer can usually transfer to a new employer's plan, transfer to an individual locked-in account (pension money) or RRSP, or leave the money in the plan.
Ongoing Service
Sub-component 4.1 asks the agent to validate whether requests to amend, renew or terminate a contract are appropriate for the client. Good service also keeps the client's information current: under the CCIR/CISRO Segregated Funds Guidance, the agent updates the client’s information before a new recommendation or transaction, when a material change becomes known, and at least every three years (every year for clients who borrowed to invest).
1. Service Needs of Individual Investors
Follow-Up
After the contract is issued: confirm that the client received the contract and confirmation, explain the right to cancel, and check that beneficiaries and successor owners were recorded as intended.
Monitor and Review
- Scheduled reviews set at the time of sale (for example, six months after a large deposit).
- Periodic reviews on the agreed service schedule, including performance, guarantees, reset opportunities and the client’s goals, using the annual statement; KYC is also updated at the guidance’s required intervals and material-change triggers.
- Change in client circumstances: marriage, separation, a new child, retirement, an inheritance, illness or a lawsuit.
- Change in the product: a fund merger or closure, or a fundamental change (higher fund expenses, a new investment objective, less frequent valuation or a higher insurance fee limit), which comes with at least 60 days' notice and the right to switch or withdraw without fees.
Transactions and What to Check
| Request | What the agent validates |
|---|---|
| Additional deposit | Fund Facts delivered for any new fund; the deposit may have its own 10-year maturity date or be limited by age; it can be cancelled within two business days of its confirmation |
| Fund switch | Free switches remaining; any contract-specific short-term trading fee; tax on any gain in a non-registered contract; whether the contract treats the switch as a reset that moves the maturity date out 10 years |
| Change of beneficiary | Revocable: the owner signs alone. Irrevocable: the beneficiary's written consent is needed (a minor cannot consent). Consider creditor protection effects and Quebec's rule that a spouse's designation is irrevocable unless stated otherwise |
| Reset | Gain since the last reset, time left to maturity, age limits and the new maturity date |
| Renewal at maturity | The top-up (if any) is credited automatically; the client may renew for a new term with new guarantees, convert to an annuity or take cash |
| Withdrawal | Proportional (or contract-specific) reduction of guarantees; any DSC still applying to older deposits; tax on gains or withholding on registered withdrawals; RRIF minimums |
| Surrender | Loss of all guarantees and features; tax; whether a partial withdrawal or switch would meet the need; written disclosure if the money is going into another IVIC |
Example: Jean-Philippe invested $5,000 in a global equity fund two years ago; it is now worth $5,200 and he wants to switch to a diversified fund. His contract treats a switch as a reset. The agent must explain that the maturity date and guarantees will move 10 years out, and that in a non-registered contract the $200 gain over his adjusted cost base is taxable. The agent must check the contract’s free-switch allowance and short-term trading rule rather than assume a fixed schedule.
2. Service Needs of Group Plan Members
| Need | What happens |
|---|---|
| Follow-up and monitor and review | Annual statements and reviews; changes in circumstances or in the plan's fund line-up |
| Locked-in account transfer | Pension money moved to a LIRA, LIF or new plan must stay locked in under pension law |
| Change of beneficiary | Members update beneficiaries; for pension plan money, a spouse's statutory rights usually come first unless waived |
| Withdrawals | Group RRSP or TFSA money may be withdrawn if the plan allows (taxable for the RRSP); locked-in pension money cannot be withdrawn except under unlocking rules |
| Purchase of an annuity | At retirement, members can buy a life annuity (required forms apply to locked-in money) or move to a group RRIF or LIF |
| Termination of employment | Options: transfer to another group plan (the new employer's plan, if it accepts transfers), transfer to an individual locked-in account (for pension money) or an individual RRSP (for group RRSP or vested DPSP money), or leave the money where the plan permits. Unvested employer contributions are forfeited where the plan terms impose a vesting period (a DPSP may use up to two years) |
3. Example: A Member Leaves the Employer
Fatima, 44, leaves her job after six years. She has $38,000 in the employer's DC pension plan (vested and locked in) and $22,000 in the group RRSP.
- DC pension: she can transfer it to her new employer's pension plan if it accepts transfers, or to a LIRA. She cannot take it in cash unless an unlocking exception applies.
- Group RRSP: she can transfer it tax-free to an individual RRSP (or the new employer's group RRSP), or withdraw it as taxable income with withholding.
- Agent's role: explain each option, check deadlines in the termination statement, compare fees in the group and individual options, and update beneficiary designations.
4. Example: The Maturity Conversation
Grace, 74, has a non-registered contract maturing next month with a 100% maturity guarantee of $120,000. The market value is $128,000, so no top-up is needed. Her agent reviews three choices:
- Renew for a new term, if the contract allows it at her age, keeping a death benefit guarantee for her children and a named beneficiary outside the estate.
- Convert to an annuity for guaranteed lifetime income, if she needs more income and can give up access to the capital.
- Take cash, if she has a planned expense.
Because the contract is non-registered, the maturity of the contract is generally a disposition, so Grace may have a capital gain on the difference between $128,000 and her adjusted cost base; the agent confirms with the insurer how a renewal is reported. The agent also updates her client information (her health, income needs and beneficiaries) before recommending anything, as the Segregated Funds Guidance expects.
Two years ago, Rémi invested $5,000 in a global equity segregated fund in a non-registered contract. It is now worth $5,200. His contract treats any fund switch as a reset. What should the agent tell him about switching to a balanced fund?
The switch is tax-free because the money stays in the same contract, and the guarantees are unchanged
The maturity date and guarantees will move out 10 years, and the $200 gain over his ACB is taxable
A short-term trading fee of 2% applies because this is his first switch
Switches are not allowed until the contract reaches its maturity date
An owner wants to remove her brother as irrevocable beneficiary of her segregated fund contract and name her new spouse instead. What is required?
Only the owner's signature, because the owner controls all designations
The written consent of the brother, as the irrevocable beneficiary
Approval from the provincial insurance regulator
A court order in every case
Owen, 51, leaves his employer. He has vested, locked-in money in the company's defined contribution pension plan. Which option is available to him?
Withdraw the full amount in cash, paying tax at his marginal rate
Transfer it to an individual locked-in account such as a LIRA, or to a new employer's pension plan that accepts it
Transfer it to his TFSA, because the contributions were made with pre-tax money
Use it to buy a 10-year term-certain annuity
Sections you finish are checked off in the contents.