From ‘Saving for Retirement” to ‘Spending in Retirement” - Income solutions that work

1. From ‘Saving for Retirement” to ‘Spending in Retirement” - Income solutions that work Ian Kerr, Investment Products Specialist Presentation for use with advisors only

2. Trying to dodge retirement planning?

3. Retirement can’t be avoided • Canadians 45 years and older hold $2.3 trillion (or 79%) of Canada’s wealth1 • By 2017, 7.7% of Canadians will have moved from saving money to retirement income1 • Those without pensions are vulnerable • Percentage of Canadian labor force with defined benefit plans dropped from 51.9% in 1980 to 31.8% in 2011 1Source: Investor Economics: Household balance sheet 2011

4. Accumulation planning has needs and solutions Needs • Pay expenses • Savings risk • Mortality risk • Market risk Solutions • Variability of income • Savings rate • Life insurance • Asset allocation Accumulate Transition Income 25 45 65 100 Age

5. Income planning is different than accumulation planning Needs • Pay expenses • Longevity risk • Estate values • Market risk Solutions • Sustainability of income • Guaranteed income products • Life insurance • Asset allocation and principal protected products Accumulate Transition Income 25 45 65 100 Age

6. What happens when inflation picks up? 99-0533C Purchasing power of $1 in 25 years

7. Facing significant challenges • People spending more years in retirement • Pensions playing smaller role • Savings rates at all-time low • Canada pension plan and stock market uncertainty • Increasing life expectancy • Gaps between desired lifestyle and income sustainability

8. Striking the right balance is important

9. Take a look at clients who ask: • Will I have enough retirement income to last my lifetime? • I already have a pension plan • Will I need more guaranteed income? • How much retirement income is enough? • How do I grow my investments without risk and losing my capital? Retirement income market will continue to seek out solutions from the advice-driven channel

10. Case study – meet James • Client profile: • 57 years old • Advanced investor • On track to retire at 65 • Non-registered savings total: $1,109,000

11. Investing for growth in retirement • Low-risk, low-return funds limit income variability and possibly sustainability • Inflation erodes purchasing power

12. Recommendations for James • Investment funds • Invest for growth • Canada Life segregated funds • Draw income efficiently using a reservoir fund strategy • Protect estate values – immediate and up to 100% death benefit guarantee

13. Invest for growth • Professionally developed single-fund solutions • Asset allocation funds • Partner managed solutions • Stand-alone funds for customized portfolios • 74 funds including specialty and 100 per cent equity funds • 12 investment managers

14. Reservoir fund strategyDraw income when needed

15. Protect estate values

16. Key opportunities with investment funds • Keep more of the growth • Aggregate assets • Preferred series segregated funds • Lower overall management fees • Introducing new income fund options

17. Keep more of the growth - preferred series • Equity fund fees as low as 1.35% • Fixed income fund fees as low as 1.10% • Specialty class fund fees as low as 1.70%

18. Why place high-net-worth clients in segregated funds? Scenario: $2.5 million portfolio 2.50% 2.00% 1.50% 1.00% 0.50% 0% Trust administration Trust set-up Management fee Advisory and management service fee

19. Defer taxes with a prescribed annuity For illustration purposes only. Comparison between a prescribed single-life annuity and a non-prescribed single-life annuity that is indexed at 2.5 per cent annually. Both scenarios are based on a 60 year old male, non-smoker with $250,000 to invest, receiving income payments annually using a marginal tax rate of 40 per cent. The prescribed annuity bar reflects the fixed annual after-tax amount and annual taxes payable for the duration of the prescribed annuity. Annuity quotes as of June 9, 2010.

20. Cashable annuity • Clients may avoid annuities because of lack of liquidity • Cashable payout annuity provides guaranteed income AND access to cash

21. Canada Life cashable annuity

22. How it works

23. Lifetime income benefit – add when ready

24. Building an income plan - meet Diane and Mark • Diane (62), Mark (65) • Married couple transitioning to retirement • Self employed with no pension • Non-registered savings $731,000 • Annual desired family income: $70,000 • Current guaranteed family income: $40,000 • Balanced investors

25. Goals • Needs • Sustainable retirement income • No change to guaranteed income if one dies unexpectedly • Wants • Variability of income • Retirement to include more travel • Willing to trade for needs and wants : • Some estate protection • Some liquidity

26. Build and show them their income solution

27. Recommended product allocation The guaranteed income from the lifetime income benefit assumes no income resets or excess withdrawals.

28. Protect both spouses’ incomes

29. “Investors haven’t really changed their desire, which is to increase wealth, but they are more conscious of protecting wealth.” Earl Bederman President, Investor Economics

30. New funds. Strong managers. Enhanced portfolios. Boosting the breadth and depth of Canada Life investment shelf

31. Ambitious year for Canada Life investments • Strategic investing with new fixed income mandates • New mandate from Putnam Investments • New short- and long-term mandates from Portico Investment Management • Investing in dividends beyond the Canadian border • New U.S. Dividend Fund (GWLIM) from GLC • Enhanced asset allocation funds from Portfolio Solutions Group

32. Full complement of fixed-income mandates

33. Consistent performance High yield bonds have provided positive returns 17 of the last 20 years Source: Barclays Global High Yield TR CAD

34. U.S. dividend mandate expands our options Enhanced Dividend (Laketon) U.S. Dividend (GWLIM) Dividend (London Capital)

35. Invest in the largest economy in the world Top 10 dividend yielding stocks in the US as of April 30, 2013 Source: Dow Jones

36. Asset allocation funds: professionally managed single fund solutions • When you invest in the asset allocation funds you get the value of Portfolio Solutions Group • Full-time professional overlay management • Provides portfolio allocation and fund manager oversight services

37. Fund performance remains strong Internal equity funds • 80% of internal funds in the top two quartiles over three years • Global Equity (Setenta) in top two quartiles over one, three and five years Source: Wealth Management Financial Management. Quartile rankings are weighted by number of Funds and includes target date funds. As of March 31, 2013.

38. Fund performance remains strong Mackenzie and external equity funds • Global Future (Mackenzie) ranked 1st quartile over one, three, five, 10 years • Canadian Equity (Bissett) and Small Cap Equity (Bissett) ranked 1st quartile over one, three, five years and second quartile over 10 years Source: Wealth Management Financial Management. Quartile rankings are weighted by number of Funds and includes target date funds. As of March 31, 2013.

39. Great opportunities right now • Competitive advantage in savings and income markets • Unique fund solutions to meet more clients’ needs • Well positioned to make most of current economic environment