In 1998, I put $2,500 into a segregated fund. I did it mostly as a favour to a relative who was working as a financial planner.
In 2000, the funds value rose to $3,853.99, wherethe reset feature was used to freeze the minimum benefit amount. This would be returned to me ten years later upon request, or awarded to my beneficiary in the event of my death.
Throughout the 2000s, the value of the mutual-fund units declined steadily (but not the benefit amount). This was due to market conditions and the high annual management expense ratio. It had been jacked up toover 4% whenregulators forcedinsurance companies to put aside more reservesto honour the benefits promised).
There were also some anxious moments during the financial crisis of 2008 and 2009, wondering if the insurance company backing the guarantee would still be around — although one advisor tells me the funds are held separately from the insurance co. assets, so the most at risk would be the difference in the market value and minimum benefit (and even that should be covered by CompCorp).
Today, I received the annual account statement. The market value was $1,551.79 as of Dec. 31, 2009. This will probably be my last annual statement: for on March 16, 2010, the ten-year waiting period is up and I can have the $3,853.99 returned.
If I had missed using the reset option,just the original principal would have been returned.
(This ispostis revised version of the original post).
Blogs & Comment
My seg fund investment
By Larry MacDonald
In 1998, I put $2,500 into a segregated fund. I did it mostly as a favour to a relative who was working as a financial planner.
In 2000, the funds value rose to $3,853.99, wherethe reset feature was used to freeze the minimum benefit amount. This would be returned to me ten years later upon request, or awarded to my beneficiary in the event of my death.
Throughout the 2000s, the value of the mutual-fund units declined steadily (but not the benefit amount). This was due to market conditions and the high annual management expense ratio. It had been jacked up toover 4% whenregulators forcedinsurance companies to put aside more reservesto honour the benefits promised).
There were also some anxious moments during the financial crisis of 2008 and 2009, wondering if the insurance company backing the guarantee would still be around — although one advisor tells me the funds are held separately from the insurance co. assets, so the most at risk would be the difference in the market value and minimum benefit (and even that should be covered by CompCorp).
Today, I received the annual account statement. The market value was $1,551.79 as of Dec. 31, 2009. This will probably be my last annual statement: for on March 16, 2010, the ten-year waiting period is up and I can have the $3,853.99 returned.
If I had missed using the reset option,just the original principal would have been returned.
(This ispostis revised version of the original post).