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The Group Guaranteed Minimum Withdrawal Benefit

Posted by on Oct 4, 2010 in Investments, Retirement | 0 comments

An article by Oma Sharma, the leader of Mercer’s DC Investment Consulting business in Canada analyses the pros and cons of the Group Guaranteed Minimum Withdrawal Benefit as another spend-down product for retiring defined contribution (DC) plan members.

Until recently, Sharma notes that retiring DC members wishing to convert their account balances into a stream of retirement income had two basic options – purchase a life annuity (with or without a guarantee) or transfer their retirement savings into a registered retirement life income fund, or RRIF (or its locked-in equivalent, a life income fund, or LIF), a type of draw-down product that allowed them to continue to control the investment of their assets while drawing income from them, subject to annual minimum and maximum withdrawal restrictions imposed by legislation.

Beginning in 2003, several insurance companies launched Guaranteed Minimum Withdrawal Benefit (GMWB) products in the retail space. Group versions of the product followed around 2007, with interesting results.

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