This module follows the four components of the CISRO Segregated Funds and Annuities curriculum: assessing the client's needs and situation (35%), analyzing the segregated funds and annuities that meet those needs (30%), implementing a recommendation (25%) and serving the client while the contract is in force (10%). These are original study notes, not official documents of CISRO or of any provincial regulator. Law and tax rules are based on the texts in force on January 1, 2027. Provincial rules are those of Ontario, British Columbia and Alberta; the other common law provinces have similar rules, to be checked with their regulator. Annual limits and amounts (RRSP, TFSA, YMPE, CPP, EI) are given with their year and may change every year.
1. Owen, 29, wants to put $15,000 into a segregated fund contract to cover the down payment on a home he plans to buy in three years. Which factor should most influence the type of fund the agent recommends?
A short time horizon leaves little time to recover from a market decline, so it limits the risk Owen can take and points toward lower-volatility funds. The best return of last year, the number of funds offered and the maximum deposit say nothing about whether a fund fits his stated goal and timeframe.
2. Which statement best defines interest rate risk?
Interest rate risk is the chance that a change in interest rates alters the market value of bonds, because bond prices move in the opposite direction to rates. Rising prices that reduce purchasing power are inflation risk, an issuer failing to repay is credit risk, and being unable to sell quickly at fair value is liquidity risk.
3. Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, an agent must keep an information record for the sale of an annuity when the agent is to receive at least what amount over the duration of the annuity?
Under paragraph 22(1)(a) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations, the record is required for a sale for which the agent is to receive “an amount of $10,000 or more over the duration of the annuity or policy”. The amounts of $1,000 and $5,000 are below that threshold, and $25,000 is higher than the Regulations require.
4. Fatima buys a $60,000 immediate annuity with non-registered savings, and her agent creates the information record on September 13, 2027. By what date at the latest must the agent verify her identity?
Section 92 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations requires the agent to verify the identity of a person for whom an information record is kept under section 22, and paragraph 105(7)(h) sets the time as “within 30 days after the day on which the information record is created”. Thirty days after September 13, 2027 is October 13, 2027. September 28 is only 15 days after creation, the period that paragraph 105(7)(g) sets for a trust company that becomes a trustee, while November 12 and December 12 are 60 and 90 days after creation, beyond the 30-day limit. Because the annuity is bought with non-registered savings, the exception in paragraph 154(2)(d) for a registered annuity policy does not apply.
5. Naveen, 45, has no photo identification with him when he applies for a $40,000 non-registered annuity, so his agent wants to verify his identity using two reliable sources. Which pair of sources meets the requirements?
Paragraph 105(1)(d) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations lets the agent do any two of the listed checks, such as a name and address from a reliable source (subparagraph (i)) and information confirming a deposit account held with a financial entity (subparagraph (iii)). Under subsection 105(4), “the information that is referred to must not be from, or derived from, the same source and neither the person whose identity is being verified nor the person or entity that is verifying their identity can be a source”. A utility bill and a bank statement come from two different sources. Two statements from one bank share a source, the agent's notes make the agent a source, and the address Naveen wrote himself makes him a source.
6. Which of the following statements about investment risk is FALSE?
Diversification reduces the effect of any single investment doing poorly, but it does not remove market risk, which affects the market as a whole, so the statement that spreading money over several funds removes market risk is false. The other three statements are accurate: bond prices move in the opposite direction to interest rates, foreign holdings carry currency risk, and inflation erodes the purchasing power of a fixed return.
7. Lucia's segregated fund earned 5.5% last year while inflation was 2.5%. Using the formula (1 + nominal return) / (1 + inflation) - 1, what was her real return, rounded to one decimal place?
The real return is (1.055 / 1.025) - 1 = 0.0293, or 2.9%. The figure -2.8% inverts the formula by dividing 1.025 by 1.055, 3.0% simply subtracts 2.5 from 5.5, an approximation that ignores that inflation also erodes the growth itself, and 8.0% adds inflation to the return instead of removing it.
8. Priya, 62, plans to retire in three years and wants to protect her capital, so she moves all her savings into a low-yield money market fund. Over a 25-year retirement, which risk is most likely to hurt her?
A money market fund protects capital but pays a low yield, so over a long retirement its return may not keep pace with rising prices and Priya's purchasing power can erode. That is inflation risk. A short-term money market fund has little exposure to foreign currencies, a single industry or the price swings of long-term bonds.
9. In an investor profile, which statement best defines the client's risk tolerance?
Risk tolerance is the amount of fluctuation in value, and possible loss, that a client can accept while pursuing a return. The time before the money is needed is the investment horizon, familiarity with products is knowledge and experience, and the money available to invest is the client's savings; each is a separate element of the investor profile.
10. Maple Ridge Logistics Ltd. applies for a non-registered group annuity for its employees, and the premiums are expected to exceed $10,000 over the life of the contract. In respect of whom must the agent keep the information record?
Subsection 22(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations provides that, for a group annuity, “the information record shall be kept in respect of the applicant for the policy or annuity”. The applicant here is the employer. A record kept in respect of each annuitant is the rule of paragraph 22(2)(a) for an individual annuity, not a group annuity; the insurer's administrator is not a party to the sale; and a record in respect of a beneficiary is required under paragraph 22(2)(b) only before funds are remitted to that beneficiary.
11. Hye-jin, 58, is in excellent health, and both of her parents lived past age 95. She has $480,000 in RRSPs and worries most about outliving her savings. Which need should the agent identify as her priority?
Longevity risk is the risk of outliving one's savings, and a guaranteed lifetime income, such as a life annuity, answers it directly. An emergency fund covers short-term needs, term life insurance protects the estate rather than her own income, and a more aggressive portfolio adds market risk without securing any income.
12. In Ontario, Kwame runs a small construction business and fears that a creditor's judgment could reach his personal savings. He buys a segregated fund contract and designates his daughter as beneficiary. Which statement about creditor protection is correct?
Under subsection 196(2) of the Insurance Act (Ontario), while a designation in favour of a “spouse, child, grandchild or parent” of the person whose life is insured is in effect, the rights and interests of the insured in the insurance money and in the contract are exempt from execution or seizure; a segregated fund contract is an individual variable insurance contract issued by a life insurer, so this life insurance rule applies to it. A designation of his estate gives no such exemption, an insurer's guarantee on the deposits does not create it, and the contract is not left unprotected merely because its value follows investments.
13. Amara, 41, is her family's only earner, and her employer has announced layoffs. She holds $90,000 in RRSPs but only $2,000 in a chequing account. Which need should the agent address first?
Amara's most urgent exposure is a loss of income, so the first need is a liquid reserve that covers several months of expenses. A deferred annuity locks money away for decades, an RRSP contribution does not give her cash she can reach without tax, and a heavier equity mix adds risk when she may need the money soon.
14. Cedar Point Bakery Ltd. wants to offer its employees a group RRSP. Before the agent can arrange the plan, what must the employer confirm?
A group RRSP depends on the employer's commitment to deduct contributions from pay and remit them to the insurer on an agreed schedule. Employees do not send contributions to the insurer themselves, the employer is not asked to guarantee a rate of return, and a group RRSP does not lock in contributions until retirement.
15. In a client fact-finding file, which formula is used to calculate net worth?
Net worth is a snapshot on one date: total assets minus total liabilities. Income minus expenses over a year is the cash-flow result, liabilities minus liquid assets is not a recognized measure of wealth, and liquid assets minus monthly expenses ignores most assets and all long-term debts.
16. A planner reviews a cash-flow statement for a couple in their forties. What does this statement mainly show?
A cash-flow statement covers a period and compares income received with expenses paid, so it shows whether income covers spending and what is available to save. The value of assets less debts is the net worth statement, an estate projection is a different planning tool, and performance against a benchmark belongs in a portfolio review.
17. A client who owns a home asks which items belong on the liabilities side of her net worth statement. Which of the following are liabilities? 1. The outstanding mortgage balance 2. Income tax owing for the year 3. The market value of the home 4. The balance on a credit card
Liabilities are amounts the client owes: the mortgage balance (1), the income tax owing (2) and the credit card balance (4). The market value of the home (3) is an asset. The answer “1 and 4” leaves out the tax owing, “2 and 3” counts the home and omits two debts, and “1, 2 and 3” wrongly includes the home while omitting the credit card.
18. Assume Rana's balance sheet shows these assets: home $480,000; RRSP $210,000; non-registered fund $65,000; car $22,000; savings $18,000. Her liabilities are a mortgage of $190,000, a line of credit of $35,000 and a car loan of $12,000. What is her net worth?
Assets total $480,000 + $210,000 + $65,000 + $22,000 + $18,000 = $795,000, and liabilities total $190,000 + $35,000 + $12,000 = $237,000. Net worth is $795,000 - $237,000 = $558,000. The figure $78,000 leaves the home out of the assets, $540,000 leaves out the $18,000 of savings, and $1,032,000 adds the liabilities instead of subtracting them.
19. Zainab, a resident of Alberta, had earned income of $150,000 in 2026. Her pension adjustment for 2026 was $9,000, and her unused RRSP deduction room at the end of 2026 was $4,000. Assume that the RRSP dollar limit for 2027 is $35,390. What is her RRSP deduction limit for 2027?
Under the definition “RRSP deduction limit” in subsection 146(1) of the Income Tax Act, the limit is A + B + R - C, where A is the unused room at the end of the preceding year and B is the lesser of the RRSP dollar limit and 18% of the preceding year's earned income, reduced by the pension adjustment. Here 18% of $150,000 is $27,000, so the limit is $4,000 + $27,000 - $9,000 = $22,000. The figure of $18,000 leaves out the unused room, $27,000 ignores both the unused room and the pension adjustment, and $31,000 ignores the pension adjustment. The 2027 RRSP dollar limit of $35,390 (page 1 of the CRA limits page, equal to the 2026 money purchase limit) does not limit the result here.
20. Henrik opened a RRIF in 2024 by transferring $552,000 from his RRSP. At January 1, 2027, the fair market value of the property held in the fund was $480,000; at December 31, 2027 it was $450,000. His spouse, Leila, is younger, but he made no election to use her age. Assume that the prescribed factor for Henrik's age in 2027 is 0.0625 and that the prescribed factor for Leila's age is 0.0556. What is the minimum amount for 2027?
Under the definition “minimum amount” in subsection 146.3(1) of the Income Tax Act, the minimum for a year after the first is A × B, where A is the fair market value of the fund's property at the beginning of the year and B is the prescribed factor for the first annuitant (section 7308 of the Income Tax Regulations), unless an election to use the spouse's age was made. So $480,000 × 0.0625 = $30,000. The figure of $28,125 uses the year-end value, $26,688 applies the spouse's factor without an election, and $34,500 applies the factor to the amount originally transferred. The factors are assumed in the question.
21. Kofi, an adult resident of Ontario, had $3,000 of unused TFSA contribution room at the end of 2025 and withdrew $2,000 from his TFSA during 2025. On March 3, 2026 he contributed $15,000 to his TFSA, and he withdrew the excess on May 28, 2026, so an excess existed in March, April and May only. He made no other contributions or withdrawals in 2026. Assume that the TFSA dollar limit for 2026 is $7,000. What tax is payable on the excess?
Under the definition “excess TFSA amount” in subsection 207.01(1) of the Income Tax Act, the excess is the contributions less the unused room at the end of the preceding year, less the preceding year's distributions, less the dollar limit: $15,000 - $3,000 - $2,000 - $7,000 = $3,000. Section 207.02 sets a tax of 1% of the highest excess in each month, so $3,000 × 1% × 3 months = $90. The figure of $30 counts one month only, $150 ignores the 2025 withdrawal, and $180 ignores the unused room. The 2026 TFSA dollar limit is $7,000 (page 1 of the CRA limits page).
22. Imani, a resident of Manitoba, had earned income of $240,000 in 2026. She has no pension adjustment and no unused RRSP deduction room carried forward. Assume that the RRSP dollar limit for 2027 is $35,390. What is the most she can deduct for RRSP contributions for 2027?
Under the definition “RRSP deduction limit” in subsection 146(1) of the Income Tax Act, the room created for a year is the lesser of the RRSP dollar limit and 18% of the preceding year's earned income. Here 18% of $240,000 is $43,200, which is more than the dollar limit, so the dollar limit applies. The figure of $43,200 ignores the dollar limit, $33,810 is the 2026 limit, and $17,695 is the 2026 DPSP limit. Figures from page 1 of the CRA limits page: 2027 RRSP dollar limit $35,390, 2026 RRSP dollar limit $33,810, 2026 DPSP limit $17,695.
23. Fatima paid a $10,000 premium in 2026 to a spousal RRSP under which her husband, Arjun, is the annuitant. She paid no other premium to a plan for Arjun. In 2027 Arjun withdrew $6,000 from the plan before it matured, and the couple live together. What amount is included in Fatima's income for 2027 because of this withdrawal?
Under subsection 146(8.3) of the Income Tax Act, when an amount from a spousal or common-law partner plan is included in the spouse's income, the contributor includes the lesser of the premiums she paid to a plan for that spouse in the year or in one of the two immediately preceding taxation years, and the amount withdrawn. The $10,000 premium paid in 2026 falls in that period, and the lesser of $10,000 and $6,000 is $6,000. The figure of $10,000 uses the premium instead of the lesser amount, $3,000 wrongly splits the withdrawal equally between the spouses, and $4,000 is the premium left after the withdrawal ($10,000 - $6,000), which the rule does not use.
24. Owen will turn 71 on June 12, 2027, and his RRSP has not yet matured. By the end of which year, at the latest, must his plan mature?
A plan can be registered only if “the plan does not provide for maturity after the end of the year in which the annuitant attains 71 years of age”, according to paragraph 146(2)(b.4) of the Income Tax Act. Owen attains 71 in 2027, so the plan must mature by December 31, 2027. Ending 2026 is too early because he is 70 then, and the ends of 2028 and 2029 come after the year in which he turns 71.
25. In 2026, Priya withdrew $5,000 from her TFSA. She had no unused TFSA room left before the withdrawal and she made no other contribution or withdrawal. When does the $5,000 return to her unused TFSA contribution room?
Under the definition “unused TFSA contribution room” in subsection 207.01(1) of the Income Tax Act, the distributions made in a calendar year are added back (element B) when the room is computed for the following year, and element C of the definition “excess TFSA amount” counts them from the start of that following year. Priya's 2026 withdrawal therefore restores her room on January 1, 2027. Putting the money back in 2026 would create an excess TFSA amount, and neither a 30-day period nor the filing of a tax return affects the room.
26. Tariq is 61. He has contributed to the Canada Pension Plan for many years and applies for his retirement pension now instead of waiting until he is 65. How is his pension affected?
Paragraph 44(1)(a) of the Canada Pension Plan provides that a retirement pension “shall be paid to a contributor who has reached sixty years of age”, so Tariq can start now. Under subsection 46(3.1), a pension that begins in a month other than the month of the contributor's 65th birthday is adjusted by a factor that reflects the time interval. It is therefore not paid in full, it does not wait until 65, and no employer confirmation is required.
27. Lucia belongs to her employer's registered pension plan, which promises each member a yearly pension of 1.5% of final average earnings for each year of service, whatever the investment results. What type of provision does the plan use for her benefit?
Subsection 147.1(1) of the Income Tax Act defines a defined benefit provision as the “terms of the plan under which benefits in respect of each member are determined in any way other than that described in the definition” of money purchase provision. A formula based on earnings and service is such a provision. A money purchase provision pays only what the member's account holds, and the group RRSP and pooled plan labels do not describe a promised pension formula.
28. Ravi, 68, has an RRSP that is maturing. His spouse, Nadia, is 62. Ravi buys a fixed-term annuity as his retirement income and elects to use Nadia's age as the Income Tax Act allows. What is the longest term of years the annuity can have?
Under the definition “retirement income” in subsection 146(1) of the Income Tax Act, a fixed-term annuity may run for “a term of years equal to 90 minus” the annuitant's age at maturity or, if the spouse is younger and the annuitant so elects, the spouse's age at maturity. With Nadia's age, 90 - 62 = 28 years. The figure of 22 years uses Ravi's own age, which applies without the election; 20 years is the cap on the guaranteed term of a life annuity only under plans entered into before March 14, 1957; and 30 years would require an age of 60, which is neither spouse's age.
29. Elise opened an RESP for her nephew Joon. Joon is now enrolled in a university program, and the promoter pays $4,000 out of the plan to Joon to help with his tuition. What does the Income Tax Act call this payment?
Subsection 146.1(1) of the Income Tax Act defines an educational assistance payment as any amount, other than a refund of payments, paid out of an education savings plan to or for an individual to assist the individual to further the individual's education at a post-secondary school level. A payment to Joon for his university tuition fits that definition. A refund of payments returns contributions to the subscriber, an accumulated income payment is the plan's investment income paid to the subscriber when it is not used for a beneficiary's education, and a designated benefit is a term defined in subsection 146.3(1) for registered retirement income funds, not for RESPs.
30. Henrik chooses to delay his CPP retirement pension until he is 72, seven years after his 65th birthday. When the pension is adjusted for the month it starts, the time interval used is deemed never to exceed how many years?
Subsection 46(7) of the Canada Pension Plan allows regulations fixing the adjustment factors to reflect the interval between the start month and the 65th birthday, but “the time interval is deemed never to exceed five years”. Henrik's actual interval is seven years, so the adjustment is limited to five. The figures of 3 and 10 years are not in the Act, and 7 years is his real delay, not the cap.
31. Leila, a resident of Alberta, contributes $5,000 to her RRSP and $5,000 to her TFSA this year. How are the two contributions treated for income tax purposes?
Paragraph 60(i) of the Income Tax Act allows a deduction for amounts deductible under section 146 for premiums paid to an RRSP, so Leila can deduct the RRSP premium within her deduction limit. A TFSA contribution is made with after-tax money and gives no deduction. For that reason it is wrong to say that both are deductible, that only the TFSA contribution is deductible, or that neither is.
32. Under the Canada Pension Plan, a retirement pension is payable to a contributor who has reached what minimum age?
Paragraph 44(1)(a) of the Canada Pension Plan states that a retirement pension “shall be paid to a contributor who has reached sixty years of age”. A pension taken before 65 is adjusted under subsection 46(3.1), so 55 and 62 are not thresholds in the Act, and 65 is the reference age for the adjustment, not the minimum age.
33. Under the Canada Pension Plan, the basic monthly amount of a retirement pension includes which share of the contributor's average monthly pensionable earnings, before the amounts for the additional earnings?
Paragraph 46(1)(a) of the Canada Pension Plan sets the first part of the basic monthly amount at “25% of their average monthly pensionable earnings”. The 8.33% and 33.33% shares apply to the first and second additional monthly pensionable earnings under paragraphs 46(1)(b) and (c), and 50.00% is not a rate in the formula.
34. The TFSA dollar limit is added to an individual's unused TFSA contribution room for a calendar year when:
The description of C in the definition “unused TFSA contribution room” in subsection 207.01(1) of the Income Tax Act adds the TFSA dollar limit “if at any time in the calendar year the individual is 18 years of age or older and resident in Canada”. Earned income is the test for RRSP room, not TFSA room. Prior contributions are not required, and the age of 71 is the RRSP maturity deadline, which has no link to TFSA room.
35. What is the minimum amount that must be paid out of a RRIF for the year in which the RRIF was entered into?
Under subsection 146.3(1) of the Income Tax Act, the “minimum amount” is, “for the year in which the fund was entered into, a nil amount”. The formula A × B applies from the following year and uses the value at the beginning of the year, not the year-end value. No half-year proportion of the next year's minimum applies.