Or, as U.S. retirement guru Wade Pfau not too long ago put it, “A retirement revenue plan must be primarily based on planning to stay, somewhat than planning to die.” The Michael James weblog not too long ago highlighted that quote.
Retirement is often about planning for sudden longevity, typically exacerbated by inflation. In spite of everything, a 65-year-old Canadian lady can anticipate to stay to 87—however there’s an 11% probability she’ll stay to 100.
That truth 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 take a position a piece of my not too long ago launched RRIF into the Function Longevity Pension Fund (LPF). A model of Stark’s presentation could also be out there on YouTubeor you will get the highlights from the Function brochure.
Examine the very best RRSP charges in Canada
Stark confirms that LPF, launched in 2021, is at present the one retail mutual fund or ETF providing longevity-protected revenue in Canada. Be aware that LPF shouldn’t be an ETF however a standard mutual fund. It goals to generate retirement revenue for all times; to take action, it has created what it describes as a “distinctive longevity threat pooling construction.”
This displays what famous finance professor Moshe Milevsky has lengthy described as “tontine considering.” See my Retired Cash column on this from 2022 after Guardian Capital LP introduced three new tontine merchandise below the “GuardPath” model. Nevertheless, a yr in the past Guardian closed the fundsso is successfully out of the tontine enterprise. Apparently, it’s a troublesome slog competing with life annuities.
Right here’s the full checklist of wealth advisors and full-service brokers that supply 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 not too long ago 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 regularly elevate distribution ranges over time. It not too long ago introduced it was boosting LPF distributions by 3% for many age cohorts in 2026, following an analogous raise final yr.
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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 gives revenue for all times by incorporating longevity threat pooling, an idea just like that utilized by outlined profit pension plans and lifelong annuities, to offer lifetime revenue.”
Function envisages LPF working alongside annuities for some retirees (see my final column on why annuities aren’t as in style as some suppose they need to be). LPF shouldn’t be registered as a pension, but it surely’s described as one as a result of it’s structured to offer revenue for all times, regardless of how lengthy you reside. It’s provided as a mutual fund somewhat than an ETF as a result of it’s not designed to be traded, Stark stated in one podcast quickly after the launch.
Age is a giant variable. Function created two lessons of the Fund: an “Accumulation” class for these below 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 extra 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 forth., 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? Aside from mortality credit, the capital is invested like several broadly diversified Asset Allocation fund. The long-term Strategic Asset Allocation is about as 49% fairness, 41% mounted revenue and 10% options. As of Sept. 30, Function lists 38.65% in mounted revenue, 43.86% in equities, 12.09% in 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 buyers are in) is 0.60%.
Stark says LPF has amassed $18 million since its launch, with 500 buyers in both the Accumulation or Decumulation lessons. He additionally referred me to the not too long ago launched actuarial overview on LPF.
Longevity revenue autos within the U.S.
Whereas LPF (and previously) Guardian are the 2 predominant 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 several methods. A number of weeks in the past, I did a roundup of the main U.S. choices by contacting numerous U.S. and Canadian retirement specialists by Featured.com and LinkedIn. The ensuing weblog covers merchandise like Vanguard Goal Retirement Revenue Fund, Constancy Strategic Advisors Core Revenue Fund, Stone Ridge LifeX Longevity Revenue ETFs, and others.
For now, it seems Function is alone on this house in Canada, other than mounted life annuities provided by insurance coverage corporations. The U.S. market is totally different due to Variable Annuities with revenue choices.
