Or, as U.S. retirement guru Wade Pfau just lately put it, “A retirement earnings plan ought to be based mostly on planning to stay, moderately than planning to die.” The Michael James weblog just lately highlighted that quote.
Retirement is often about planning for sudden longevity, typically exacerbated by inflation. In any case, a 65-year-old Canadian girl can count on to stay to 87—however there’s an 11% probability she’ll stay to 100.
That reality was cited by Fraser Stark, President of Longevity Retirement Platform at Toronto-based Function Investments Inc., at a September presentation to the Retirement Membership, which we described this previous summer season. Stark’s presentation was compelling sufficient that I made a decision to speculate a piece of my just lately launched RRIF into the Function Longevity Pension Fund (LPF). A model of Stark’s presentation could also be obtainable on YouTube, or you may get the highlights from the Function brochure.
Examine the very best RRSP charges in Canada
Stark confirms that LPF, launched in 2021, is presently the one retail mutual fund or ETF providing longevity-protected earnings in Canada. Observe that LPF isn’t an ETF however a standard mutual fund. It goals to generate retirement earnings for all times; to take action, it has created what it describes as a “distinctive longevity danger pooling construction.”
This displays what famous finance professor Moshe Milevsky has lengthy described as “tontine pondering.” See my Retired Cash column on this from 2022 after Guardian Capital LP introduced three new tontine merchandise underneath the “GuardPath” model. Nonetheless, a 12 months in the past Guardian closed the funds, so is successfully out of the tontine enterprise. Apparently, it’s a tricky slog competing with life annuities.
Right here’s the total checklist of wealth advisors and full-service brokers that provide it. Included are full-service brokerages (and/or their low cost brokerage items) of the large banks, together with Financial institution of Montreal, Nationwide Financial institution, and just lately Royal Financial institution on a non-solicited foundation. Amongst many independents providing it are Questrade and Qtrade. As well as, Stark says iA Monetary permits investments in LPF on a non-solicited foundation.
Mimicking outlined profit pensions
Function doesn’t use the time period tontine to explain LPF, but it surely does goal to do what conventional employer-sponsored outlined profit (DB) pensions do: in impact, those that die early subsidize the fortunate few who stay longer than anticipated.
LPF offers with the dreaded inflation bugaboo by aiming to progressively elevate distribution ranges over time. It just lately introduced it was boosting LPF distributions by 3% for many age cohorts in 2026, following an analogous carry final 12 months.
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Right here’s how Function’s actuaries describe LPF:
“The Longevity Pension Fund is the world’s first mutual fund that provides earnings for all times by incorporating longevity danger pooling, an idea much like that utilized by outlined profit pension plans and lifelong annuities, to supply lifetime earnings.”
Function envisages LPF working alongside annuities for some retirees (see my final column on why annuities aren’t as common as some suppose they need to be). LPF isn’t registered as a pension, but it surely’s described as one as a result of it’s structured to supply earnings for all times, regardless of how lengthy you reside. It’s provided as a mutual fund moderately than an ETF as a result of it’s not designed to be traded, Stark mentioned in a single podcast quickly after the launch.
Age is an enormous variable. Function created two courses of the Fund: an “Accumulation” class for these underneath age 65, and a “Decumulation” class for these 65 or older. You can not buy it when you attain 80. LPF guarantees month-to-month funds for all times however the construction is versatile sufficient to permit for both redemptions or further investments within the product—one thing conventional life annuities don’t often present. When shifting from the Accumulation to the Decumulation product at age 65, the rollover is freed from capital positive aspects tax penalties.
The brochure describes six age cohorts, 1945 to 1947, 1948 to 1950 and so on., ending in 1960. Yield for the oldest cohort as of September 2025 is listed as 8.81%, falling to five.81% for the 1960 cohort. My very own cohort of 1951–1953 has a yield of seven.24%.
How is that this generated? Other than mortality credit, the capital is invested like all broadly diversified Asset Allocation fund. The long-term Strategic Asset Allocation is about as 49% fairness, 41% mounted earnings and 10% alternate options. As of Sept. 30, Function lists 38.65% in mounted earnings, 43.86% in equities, 12.09% in alternate options, and 4.59% in money or equivalents. Geographic breakdown is 54.27% Canada, 30.31% the US, 10.84% worldwide/rising, and the identical 4.59% in money. MER for the Class F fund (which most of its traders are in) is 0.60%.
Stark says LPF has accrued $18 million since its launch, with 500 traders in both the Accumulation or Decumulation courses. He additionally referred me to the just lately launched actuarial evaluation on LPF.
Longevity earnings autos within the U.S.
Whereas LPF (and previously) Guardian are the 2 important longevity product suppliers in Canada of which I’m conscious, a number of merchandise in the US try and deal with the identical drawback in numerous methods. A couple of weeks in the past, I did a roundup of the key U.S. choices by contacting varied U.S. and Canadian retirement specialists by way of Featured.com and LinkedIn. The ensuing weblog covers merchandise like Vanguard Goal Retirement Earnings Fund, Constancy Strategic Advisors Core Earnings Fund, Stone Ridge LifeX Longevity Earnings ETFs, and others.
For now, it seems Function is alone on this house in Canada, aside from mounted life annuities provided by insurance coverage firms. The U.S. market is totally different due to Variable Annuities with earnings choices.
