A presentation designed for: Janet Client Prepared by: Sun Life Sample
Personal Retirement Account Plan Prepared especially for: Janet Client Table of Contents This presentation contains 6 sections as follows: 1. Problem Description and Recommendation Page 3 2. How it Works Page 4 3. Assumptions Page 6 4. Accumulation of Funds Page 8 5. Retirement Income from Withdrawals Page 9 6. Retirement Income from Bank Loans Page 11 If you have any questions, please feel free to contact me, Sun Life Sample 123 Any Street Any Town, Ontario, L1L 2O5 Office: 416-555-5555 E-mail: john.advisor@sunlife.com About This Presentation This presentation was prepared for information purposes only and is neither an insurance contract nor an offer to provide insurance. It does not form part of any policy that may be issued and is not intended to provide or replace professional legal or tax advice. This presentation contains figures extracted from the Sun Universal Life illustration accompanying this presentation and bearing the same date. This presentation should be read together with that illustration and is incomplete without it. For example, the accompanying illustration contains policy values based on more than one interest rate scenario. Illustrating multiple scenarios shows how even a small change in interest rate assumptions can result in a significant reduction in policy values. Such changes would have a similar impact on the figures shown in this presentation. Unless otherwise indicated, none of the figures shown in this presentation are guaranteed. They are based on assumptions that are certain to change and are neither an estimate nor a guarantee of future performance. Actual results will differ upward or downward from those shown depending on future experience. Even a small change can have a large negative impact on the non-guaranteed figures illustrated in this presentation. NB: Page 2 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Problem Description and Recommendation Situation You want to create additional retirement income You earn in excess of $100,000 You have maximized pension and RRSP contributions, and You have 15 years before needing income. Objectives Generate additional retirement income through tax deferred accumulation. Problems The tax payable on non-registered investments may be equal to or more than the actual amount saved. Overcoming this tax problem may mean taking more investment risk than you would prefer. Recommendation The Personal Retirement Account, a retirement solution using life insurance, may be your best solution. A universal life insurance policy is an excellent tool that can be used to create a tax advantaged account in addition to the basic insurance benefit. This account is under your control while you are alive, and is paid out to your designated beneficiary outside your estate at death. This means you not only avoid paying taxes on the growth in the account, but the probate and legal fees as well. The Personal Retirement Account concept demonstrates that a life insurance policy can be used successfully as a shelter for annual investments until money is withdrawn during retirement years. Even then, taxes may continue to be deferred by using the policy as collateral for annual loans from a bank or trust company. NB: Page 3 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client How it works Unlike contributions to an RRSP, these annual payments are not deductible for income tax purposes. However, provided the policy remains exempt ( will maintain the exempt status as per your instructions), the policy fund earnings will be exempt from income tax while in the policy. WHILE EMPLOYED THE ACCUMULATION PERIOD The Accumulation of Funds section illustrates what happens during the employment period. This emphasizes the difference in potential results from attempting to achieve this goal with a non-registered Alternative Investment versus the life insurance policy. An identical sum is invested in either the Alternative Investment or the policy illustrated. Earnings that accrue to the policy are tax exempt (provided they stay in the policy). In the non-registered Alternative Investment, growth is reduced by annual taxes at the rates shown, prior to reinvestment. RETIREMENT TURNING SAVINGS INTO INCOME There are two possible ways to create income from the accumulated funds. Retirement Income from Withdrawals The first option is to make withdrawals directly from the policy or the Alternative Investment. The Alternative Investment may include both tax-paid and tax-deferred funds. Withdrawals from the Alternative Investment will be subject to tax on unrealized capital gains where applicable. Withdrawals from the policy will be subject to tax to the extent that the policy fund value exceeds the adjusted cost basis of the policy. The Retirement Income from Withdrawals section illustrates the gross amount of withdrawal needed from the policy so that the after tax amount equals the after tax withdrawal from the Alternative Investment. The tax deferred during the accumulation period will prove to be a long term advantage for the funds in the life insurance policy over the Alternative Investment. The Estate Benefit of the Alternative Investment is the net amount available after taxes have been paid on any deferred capital gains. The Estate Benefit of the Life Insurance Policy is the death benefit, which is payable tax-free to the beneficiary(ies) of the policy. Retirement Income from Bank Loans A second option is to generate income through the use of the policy as collateral against annual loans from a financial institution. This strategy can provide a higher level of after-tax income during the insured s lifetime, compared with making withdrawals from the policy. The policy owner makes a collateral assignment of the policy to a financial institution, giving them first charge against the policy fund value (ownership of the policy is not relinquished). A series of loans generates an income against the security of the policy in a manner which postpones the repayment of the loan until the insured dies. Upon death, the financial institution has first call upon the Estate Benefit of the policy, which is paid out tax-free. After the loan is cleared, the balance of the Estate Benefit is paid to the insured s beneficiary. NB: Page 4 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Note that most financial institutions will limit the accumulated loan to a maximum percentage of the policy fund value. If the accumulated loan balance reaches this limit, you will have to make payments on the loan, or pledge additional assets as collateral. If you are unable to meet this requirement at that time, the financial institution may use funds from the policy to reduce or pay off the loan. Under these circumstances, you will be liable for any taxes payable as a result of the surrender or partial surrender of the policy. After payment of these taxes, the surrender of the policy may not generate enough cash to repay the loan. The borrowing strategy is viable only if you are able to see it through until death. There are some potential risks associated with borrowing against the policy in the manner illustrated. The risks are as follows: 1. Availability of the financial institution loans will depend on the financial institution s lending criteria at the time the loan(s) are applied for. 2. The spread between the interest rate on the accumulating loan and the interest being earned by the policy will affect the amount of loan available. The greater the spread, the less income will be available from borrowing and the sooner you may have to make additional premium payments or loan repayments. 3. Under current tax law, borrowing against an asset such as a life insurance policy does not trigger taxable income. However, Canada Revenue Agency (CRA) may change legislation or choose to apply General Anti-Avoidance Rules (GAAR) or otherwise attempt to deem the series of loans to be policy loans and therefore be subject to tax. This is a particular risk when the loan is set up at the same time as the policy or shortly thereafter. Professional tax and legal advice should be obtained prior to committing to the use of the policy as collateral. The insurance payment figures and estate benefit amounts are extracted from the policy illustration included with this presentation. Please refer to it for further information concerning the policy. NB: Page 5 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Assumptions Insureds: Client, Janet Age: 40 Life Expectancy: 83 Tax Assumptions: Marginal tax rate on interest: 45% Marginal tax rate on dividend income: 25% Capital Gains Inclusion Rate: 50% Alternate Investment Assumptions: Composition: Allocation Now 65 Assumed Return Cash 5% 10% 3% 100% Investment Returns Interest Dividends Capital Gains Realized Gains Canadian Bond 25% 40% 4% 85% 0% 15% 10% Foreign Bond 10% 10% 4% 80% 0% 20% 10% Canadian Equity 35% 30% 6% 0% 12% 88% 15% Foreign Equity 10% 5% 6% 0% 5% 95% 15% US Equity 10% 5% 6% 0% 5% 95% 15% Small Cap Equity 5% 0% 6% 0% 0% 100% 20% Rate of Return 5.15% 4.70% Annual Portfolio Turnover: 20.00% Life Policy Assumptions: Insurance Policy Type: Sun Universal Life (age nearest) Insurance amount: $250,000 Payment method: Planned Payments for 20 years Income Assumptions: After Tax Target Income: Period: $38,000 Starting in Year: 26 Indexed: 0% for Years: 6 NB: Page 6 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Leveraged Income Assumptions: Income: Targeted Assumed Loan Limit: 90% At age: 83 Loan Rate: 7.00% NB: Page 7 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Accumulation of Funds Policy Year Age Alternative Investment Annual Deposit Growth Tax on Growth Net Estate Value Life Insurance Policy Fund Value Net Estate Value 1 41 $10,000 $515 $94 $10,367 $8,347 $258,347 2 42 $10,000 $1,052 $202 $21,118 $17,569 $267,569 3 43 $10,000 $1,610 $324 $32,267 $27,290 $277,290 4 44 $10,000 $2,192 $457 $43,831 $37,537 $295,644 5 45 $10,000 $2,796 $601 $55,825 $48,276 $316,237 6 46 $10,000 $3,424 $756 $68,269 $59,518 $333,078 7 47 $10,000 $4,076 $920 $81,177 $71,322 $348,086 8 48 $10,000 $4,754 $1,093 $94,569 $83,737 $362,177 9 49 $10,000 $5,458 $1,275 $108,463 $96,808 $383,651 10 50 $10,000 $6,188 $1,466 $122,878 $110,509 $403,165 11 51 $10,000 $6,946 $1,665 $137,834 $124,895 $421,444 12 52 $10,000 $7,733 $1,873 $153,351 $140,021 $433,110 13 53 $10,000 $8,550 $2,091 $169,452 $156,000 $445,417 14 54 $10,000 $9,398 $2,317 $186,157 $172,878 $458,351 15 55 $10,000 $10,277 $2,552 $203,490 $190,707 $471,912 16 56 $10,000 $11,190 $2,797 $221,474 $209,540 $486,107 17 57 $10,000 $12,137 $3,051 $240,133 $229,434 $500,950 18 58 $10,000 $13,120 $3,316 $259,495 $250,446 $516,451 19 59 $10,000 $14,140 $3,590 $279,583 $272,641 $532,628 20 60 $10,000 $15,199 $3,875 $300,427 $296,084 $549,505 21 61 $0 $15,782 $4,077 $311,687 $310,518 $561,394 22 62 $0 $16,385 $4,276 $323,378 $325,752 $575,752 23 63 $0 $17,008 $4,473 $335,513 $341,817 $591,817 24 64 $0 $17,654 $4,671 $348,108 $358,752 $608,752 25 65 $0 $16,721 $5,567 $359,439 $376,602 $626,602 NB: Page 8 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Retirement Income from Withdrawals Policy Year Age After-Tax Income Alternative Investment Pre-tax withdrawal Tax on Growth Net Estate Value Pre-tax withdrawal Life Insurance Policy Fund Value Cost of Insurance from fund Net Estate Value 26 66 $38,000 $38,792 $5,060 $331,890 $50,116 $342,591 $1,514 $592,591 27 67 $38,000 $38,757 $4,569 $303,436 $51,029 $305,777 $1,514 $555,777 28 68 $38,000 $38,730 $4,086 $274,052 $51,980 $265,970 $1,514 $515,970 29 69 $38,000 $38,708 $3,606 $243,710 $52,993 $222,941 $1,514 $472,941 30 70 $38,000 $38,692 $3,124 $212,381 $54,119 $176,397 $1,514 $426,397 31 71 $38,000 $38,679 $2,636 $180,034 $55,456 $125,926 $1,514 $375,926 32 72 $0 $0 $2,711 $185,869 $0 $131,181 $1,514 $381,181 33 73 $0 $0 $2,791 $191,892 $0 $136,720 $1,514 $386,720 34 74 $0 $0 $2,875 $198,108 $0 $142,559 $1,514 $392,559 35 75 $0 $0 $2,963 $204,526 $0 $148,713 $1,514 $398,713 36 76 $0 $0 $3,055 $211,151 $0 $155,201 $1,514 $405,201 37 77 $0 $0 $3,150 $217,989 $0 $162,039 $1,514 $412,039 38 78 $0 $0 $3,250 $225,049 $0 $169,248 $1,514 $419,248 39 79 $0 $0 $3,353 $232,338 $0 $176,846 $1,514 $426,846 40 80 $0 $0 $3,460 $239,862 $0 $184,855 $1,514 $434,855 41 81 $0 $0 $3,570 $247,629 $0 $193,298 $1,514 $443,298 42 82 $0 $0 $3,685 $255,648 $0 $202,198 $1,514 $452,198 43 83 $0 $0 $3,803 $263,926 $0 $211,579 $1,514 $461,579 44 84 $0 $0 $3,926 $272,472 $0 $221,467 $1,514 $471,467 45 85 $0 $0 $4,052 $281,295 $0 $231,890 $1,514 $481,890 46 86 $0 $0 $4,183 $290,404 $0 $242,878 $1,514 $492,878 47 87 $0 $0 $4,318 $299,807 $0 $254,459 $1,514 $504,459 48 88 $0 $0 $4,457 $309,515 $0 $266,668 $1,514 $516,668 49 89 $0 $0 $4,601 $319,538 $0 $279,536 $1,514 $529,536 50 90 $0 $0 $4,750 $329,884 $0 $293,101 $1,514 $543,101 51 91 $0 $0 $4,904 $340,566 $0 $307,400 $1,514 $557,400 52 92 $0 $0 $5,063 $351,594 $0 $322,472 $1,514 $572,472 53 93 $0 $0 $5,226 $362,978 $0 $338,360 $1,514 $588,360 54 94 $0 $0 $5,396 $374,732 $0 $355,107 $1,514 $605,107 55 95 $0 $0 $5,570 $386,865 $0 $372,761 $1,514 $622,761 56 96 $0 $0 $5,751 $399,392 $0 $391,369 $1,514 $641,369 57 97 $0 $0 $5,937 $412,324 $0 $410,984 $1,514 $660,984 NB: Page 9 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Policy Year Age After-Tax Income Alternative Investment Pre-tax withdrawal Tax on Growth Net Estate Value Pre-tax withdrawal Life Insurance Policy Fund Value Cost of Insurance from fund Net Estate Value 58 98 $0 $0 $6,129 $425,675 $0 $431,660 $1,514 $681,660 59 99 $0 $0 $6,327 $439,459 $0 $453,455 $1,514 $703,455 60 100 $0 $0 $6,532 $453,688 $0 $476,428 $1,514 $726,428 NB: Page 10 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Retirement Income from Bank Loans Policy Year Age Note: There are interest rate risks and possible tax risks when using this strategy. Annual Loan Bank Loan Accumulated Loan Balance % of Policy Fund Value Additional Collateral Needed Fund Value Life Insurance Policy After-Tax Cash Value Net Cash Value at Cancellation Net Estate Value 26 66 $38,000 $40,660 10% $0 $395,418 $294,609 $253,949 $604,758 27 67 $38,000 $84,166 20% $0 $415,252 $304,120 $219,954 $581,086 28 68 $38,000 $130,718 30% $0 $436,159 $314,105 $183,387 $555,441 29 69 $38,000 $180,528 39% $0 $458,197 $324,566 $144,038 $527,669 30 70 $38,000 $233,825 49% $0 $481,428 $335,510 $101,685 $497,603 31 71 $38,000 $290,853 57% $0 $505,915 $346,934 $56,081 $465,062 32 72 $0 $311,213 59% $0 $531,726 $358,847 $47,634 $470,513 33 73 $0 $332,998 60% $0 $558,935 $371,259 $38,261 $475,937 34 74 $0 $356,308 61% $0 $587,615 $384,179 $27,871 $481,307 35 75 $0 $381,250 62% $0 $617,846 $397,615 $16,365 $486,596 36 76 $0 $407,938 63% $0 $649,714 $411,575 $3,637 $491,776 37 77 $0 $436,494 64% $0 $683,305 $426,051 ($10,443) $496,811 38 78 $0 $467,049 65% $0 $718,713 $441,037 ($26,012) $501,664 39 79 $0 $499,742 66% $0 $756,037 $456,518 ($43,224) $506,295 40 80 $0 $534,724 67% $0 $795,381 $472,483 ($62,241) $510,657 41 81 $0 $572,155 68% $0 $836,852 $488,915 ($83,240) $514,697 42 82 $0 $612,206 70% $0 $880,567 $505,798 ($106,408) $518,361 43 83 $0 $655,060 71% $0 $926,648 $523,122 ($131,938) $521,588 44 84 $0 $700,914 72% $0 $975,221 $540,876 ($160,038) $524,307 45 85 $0 $749,978 73% $0 $1,026,422 $564,532 ($185,446) $526,444 46 86 $0 $802,476 74% $0 $1,080,392 $594,215 ($208,261) $527,916 47 87 $0 $858,649 76% $0 $1,137,283 $625,506 ($233,143) $528,634 48 88 $0 $918,754 77% $0 $1,197,251 $658,488 ($260,266) $528,497 49 89 $0 $983,067 78% $0 $1,260,464 $693,255 ($289,812) $527,397 50 90 $0 $1,051,882 79% $0 $1,327,096 $729,903 ($321,979) $525,214 51 91 $0 $1,125,514 81% $0 $1,397,333 $768,533 ($356,981) $521,819 52 92 $0 $1,204,300 82% $0 $1,471,370 $809,253 ($395,047) $517,070 53 93 $0 $1,288,601 83% $0 $1,549,412 $852,177 ($436,424) $510,811 54 94 $0 $1,378,803 85% $0 $1,631,676 $897,422 ($481,381) $502,873 55 95 $0 $1,475,319 86% $0 $1,718,391 $945,115 ($530,204) $493,072 NB: Page 11 of 12
Personal Retirement Account Plan Prepared especially for: Janet Client Policy Year Age Annual Loan Bank Loan Accumulated Loan Balance % of Policy Fund Value Additional Collateral Needed Fund Value Life Insurance Policy After-Tax Cash Value Net Cash Value at Cancellation Net Estate Value 56 96 $0 $1,578,591 87% $0 $1,809,797 $995,388 ($583,203) $481,206 57 97 $0 $1,689,092 89% $0 $1,906,148 $1,048,382 ($640,710) $467,056 58 98 $0 $1,807,328 90% $388 $2,007,711 $1,104,241 ($703,087) $450,383 59 99 $0 $1,933,841 91% $30,549 $2,114,769 $1,163,123 ($770,718) $430,928 60 100 $0 $2,069,210 93% $64,354 $2,227,618 $1,225,190 ($844,020) $408,408 NB: Page 12 of 12
An illustration designed for: Janet Client Prepared by: Sun Life Sample
About This Illustration This illustration was prepared for information purposes only and is neither an insurance contract nor an offer to provide insurance. It does not form part of any policy that may be issued and is not intended to provide or replace professional legal or tax advice. Unless otherwise indicated, the figures shown in this illustration are not guaranteed. They are based on assumptions that are certain to change and are neither an estimate nor a guarantee of future performance. They should be treated as hypothetical only. Actual results will differ upward or downward from those shown depending on future experience. Even a small change in one of these assumptions can have a large negative impact on the nonguaranteed figures shown in this illustration. Payments, withdrawals, cost of insurance and transfers from the service account are shown at the beginning of the year. Death benefits, cash values, policy fund values and transfers to the service account are shown at the end of the year. For more details about the information contained in this illustration, please consult your advisor or refer to your SunUniversalLife client guide. Page 2 of 16
Table of Contents SunUniversalLife combines comprehensive life insurance protection with a variety of self-directed, tax-deferred investment options into one unique plan with no annual administration fee. This illustration contains 4 sections as follows: 1. Illustration Details Page 4 2. Fund Investment Options Page 6 3. Illustrations - Policy Values Page 7 - Summary of Basic Coverages Page 9 - Sensitivity Analysis Page 11 - Plan Activity Summary Page 13 - Policy Taxation Summary Page 14 4. Statement of Variability Page 16 If you have any questions, please feel free to ask me. Sun Life Sample 123 Any Street Any Town, Ontario, L1L 2O5 Office: 416-555-5555 E-mail: john.advisor@sunlife.com Page 3 of 16
Section 1. Illustration Details Definition of age: Age means a person s age on their birthday nearest to a particular date. This is known as age nearest. A person s age at the policy date means their age on their birthday nearest to a policy date. For example, if the insured person s actual age is 34 and 7 months, the insurance age will be 35. When we say a benefit ends at age 65, it means the policy anniversary nearest their 65th birthday. Basic Coverages Cost of Insurance Rate Type Insured Person(s) Sex Age Insurance (COI) Amount Class 1 Single Level Term $250,000 Janet Client F Non-smoker 40 Additional COI Charges Death Benefit Option: Investment Bonus: Options to Maintain Tax Exempt Status: Insurance Amount Adjustment: Non-exempt Fund Allocation: Service Account: Planned Periodic Payment: Amount Required With Application If Applying for Temporary Life Insurance: Initial Insurance Factor: $1,893 Assumed Primary Interest Rate: 5.000% Assumed Alternate Interest Rate: 7.000% Insurance Amount Plus Fund Selected Increase Insurance Amount and reverse Apply to service account Daily Interest $10,000.00 Yearly for 20 years $1,932.00 ** Assumed Marginal Tax Rate: 45% Premium Tax Rate: 2.00% based on Ontario residence All basic coverages and additional benefits illustrated will be subject to underwriting review and approval. Please refer to the SunUniversalLife client guide for additional information on the product. ** Even though this amount includes the cost for any applicable optional benefits, optional benefits are not included in the temporary life insurance coverage. The following amounts are provided as a guide to help you manage your policy. They are based on the assumptions used in this report with the primary interest rate. First Year Annual Payment Amount to Maximize Discounts and Bonuses: $5,677.50 Estimated Minimum First Year Annual Payment: $1,932.00 Estimated First Year Annual Payment to Keep Policy Tax Exempt: $10,351.59 Page 4 of 16
This report illustrates how the SunUniversalLife policy may perform based on certain assumptions. The Planned Periodic Payment or any payment amounts shown (including minimum or maximum amounts) are not guaranteed and may not be enough to keep the policy in force. Additional payments may be needed if interest assumptions are not met. Page 5 of 16
Section 2. Fund Investment Options An important part of developing your SunUniversalLife policy is choosing investment options that are right for you. This section shows historical performance and guaranteed rates for your selected investment options. These returns are net of management fees. Please refer to the Investment Account Fact Sheets for additional information regarding available investment options. Investment Account Historical Average Rates(%) Since inception (Max 40 yrs) 2000-2010 2005-2010 Guaranteed Minimum Rates(%) Historical Average: 7.700% This average is based on your illustrated investment mix percentages. The historical average is not a forecast of future performance. This means the returns you see in the chart are not guaranteed. Historical Average Rates: All historical rates shown have been adjusted to show how the available options would have performed as part of a SunUniversalLife policy. Indexed Account historical figures show average annual increases in the respective Index. Investment Mix(%) Canadian Equity 7.7% 2.7% 3.6% N/A 100.0% Guaranteed Minimum Rates: These rates are the minimum interest rates you will receive according to any GIA you decide to include in your investment mix. There are no guarantees on returns from indexed and managed accounts as market values will fluctuate on a daily basis. For more details on the guaranteed minimums for each of the available investment options, refer to your SunUniversalLife investment account fact sheets. Assumed Interest Rates: Sun Life Financial has determined an appropriate assumed primary interest rate range for this illustration. Our range is between 0% or the historical average plus 1% to a maximum of 10%. The assumed primary interest rate for this illustration is 5.000%. Where Your Money Goes: All payments to a SunUniversalLife plan are first put into the activity account. A minimum amount of $250 must be met for each and every investment option or the entire payment will remain in the activity account until the minimum has been achieved. Allocating smaller percentages to accounts should be avoided if the payments are not substantial to refrain from keeping funds in the activity account for long periods of time. Page 6 of 16
Section 3. Illustrations - Policy Values Actual returns will vary over the life of a policy, affecting the values illustrated on this page. Please refer to the Sensitivity Analysis section for an understanding of how Cash Surrender Values and Death Benefits vary under different interest rate assumptions. Year Client Age Payments (based on an assumed primary interest rate of 5.000%) Before Tax Withdrawals Death Benefit Policy Fund Value Service Account Balance Cash Surrender Value Assumed Interest Rate 1 41 $10,000 $0 $258,347 $8,347 $0 $6,454 5.00% 2 42 $10,000 $0 $267,569 $17,569 $0 $13,784 5.00% 3 43 $10,000 $0 $277,290 $27,290 $0 $21,613 5.00% 4 44 $10,000 $0 $295,644 $37,537 $0 $31,860 5.00% 5 45 $10,000 $0 $316,237 $48,276 $0 $42,599 5.00% 6 46 $10,000 $0 $333,078 $59,518 $0 $53,841 5.00% 7 47 $10,000 $0 $348,086 $71,322 $0 $65,644 5.00% 8 48 $10,000 $0 $362,177 $83,737 $0 $78,059 5.00% 9 49 $10,000 $0 $383,651 $96,808 $0 $93,023 5.00% 10 50 $10,000 $0 $403,165 $110,509 $0 $108,617 5.00% 11 51 $10,000 $0 $421,444 $124,895 $0 $124,895 5.00% 12 52 $10,000 $0 $433,110 $140,021 $0 $140,021 5.00% 13 53 $10,000 $0 $445,417 $156,000 $0 $156,000 5.00% 14 54 $10,000 $0 $458,351 $172,878 $0 $172,878 5.00% 15 55 $10,000 $0 $471,912 $190,707 $0 $190,707 5.00% 16 56 $10,000 $0 $486,107 $209,540 $0 $209,540 5.00% 17 57 $10,000 $0 $500,950 $229,434 $0 $229,434 5.00% 18 58 $10,000 $0 $516,451 $250,446 $0 $250,446 5.00% 19 59 $10,000 $0 $532,628 $272,641 $0 $272,641 5.00% 20 60 $10,000 $0 $549,505 $296,084 $0 $296,084 5.00% 26 66 $0 $0 $645,418 $395,418 $0 $395,418 5.00% 31 71 $0 $0 $755,915 $505,915 $0 $505,915 5.00% 36 76 $0 $0 $899,714 $649,714 $0 $649,714 5.00% 41 81 $0 $0 $1,086,852 $836,852 $0 $836,852 5.00% 46 86 $0 $0 $1,330,392 $1,080,392 $0 $1,080,392 5.00% 51 91 $0 $0 $1,647,333 $1,397,333 $0 $1,397,333 5.00% 56 96 $0 $0 $2,059,797 $1,809,797 $0 $1,809,797 5.00% Page 7 of 16
This illustration projects values for SunUniversalLife with an annual investment bonus beginning at the end of year 2 and any discounts in the annual cost of insurance if applicable. The policy values in the table above include the bonus. The Cash Surrender Value includes any balance in the Service Account and is net of surrender charges. The Death Benefit does NOT include any balance in the Service Account. Page 8 of 16
Section 3. Illustrations - Summary of Basic Coverages Year Client Age Summary for Basic Coverage #1 (based on an assumed primary interest rate of 5.000%) Net Cost of Insurance Cost of = - Insurance Insurance Discount Funding Ratio Death Benefit 1 41 $1,893 $1,893 $0 5.2840 $258,347 2 42 $1,514 $1,893 $379 5.2840 $267,569 3 43 $1,514 $1,893 $379 5.2840 $277,290 4 44 $1,514 $1,893 $379 5.2840 $295,644 5 45 $1,575 $1,969 $394 5.2840 $316,237 6 46 $1,650 $2,063 $413 5.2840 $333,078 7 47 $1,696 $2,120 $424 5.2840 $348,086 8 48 $1,722 $2,153 $431 5.2840 $362,177 9 49 $1,737 $2,171 $434 5.2840 $383,651 10 50 $1,813 $2,266 $453 5.2840 $403,165 11 51 $1,867 $2,333 $467 5.2840 $421,444 12 52 $1,904 $2,381 $476 5.2840 $433,110 13 53 $1,871 $2,339 $468 5.2840 $445,417 14 54 $1,837 $2,296 $459 5.2840 $458,351 15 55 $1,800 $2,250 $450 5.2840 $471,912 16 56 $1,762 $2,202 $440 5.2840 $486,107 17 57 $1,721 $2,151 $430 5.2840 $500,950 18 58 $1,679 $2,099 $420 5.2840 $516,451 19 59 $1,635 $2,044 $409 5.2840 $532,628 20 60 $1,589 $1,987 $397 5.2840 $549,505 26 66 $1,514 $1,893 $379 4.0646 $645,418 31 71 $1,514 $1,893 $379 3.4090 $755,915 36 76 $1,514 $1,893 $379 2.9356 $899,714 41 81 $1,514 $1,893 $379 2.5776 $1,086,852 46 86 $1,514 $1,893 $379 2.2974 $1,330,392 51 91 $1,514 $1,893 $379 2.0722 $1,647,333 56 96 $1,514 $1,893 $379 1.8871 $2,059,797 The Net Cost of Insurance is based on the Cost of Insurance less the Insurance Discount, which is calculated using the Funding Ratio. Actual returns will vary over the life of a policy affecting the values illustrated on this page. Please refer to the Sensitivity Analysis section for an understanding of how Cash Surrender Values and Death Benefits vary under different interest rate assumptions. Page 9 of 16
different interest rate assumptions. The Death Benefit does NOT include any balance in the Service Account. Page 10 of 16
Section 3. Illustrations - Sensitivity Analysis To give you an idea of how interest rates can affect your SunUniversalLife policy, the following Sensitivity Analysis shows how your Cash Surrender Values and Death Benefits will perform under three different interest rate environments based on the illustration assumptions. All values illustrated below include any balance in the Service Account. Cash Surrender Values (CSV) Total Policy Death Benefits Year 5.000% 7.000% 2.000% 5.000% 7.000% 2.000% 1 $6,454 $6,630 $6,191 $258,347 $258,522 $258,083 2 $13,784 $14,320 $12,993 $267,569 $268,105 $266,778 3 $21,613 $22,721 $20,004 $277,290 $281,116 $275,682 4 $31,860 $33,774 $29,122 $295,644 $304,662 $284,800 5 $42,599 $45,532 $38,459 $316,237 $329,257 $294,137 6 $53,841 $58,044 $48,021 $333,078 $354,926 $303,699 7 $65,644 $71,371 $57,812 $348,086 $378,452 $313,490 8 $78,059 $85,616 $67,839 $362,177 $397,237 $323,517 9 $93,023 $102,768 $80,000 $383,651 $423,840 $333,785 10 $108,617 $120,945 $92,407 $403,165 $448,927 $344,299 11 $124,895 $140,245 $105,067 $421,444 $473,239 $355,067 12 $140,021 $158,873 $116,093 $433,110 $491,422 $366,093 13 $156,000 $178,886 $127,385 $445,417 $510,764 $377,385 14 $172,878 $200,391 $138,948 $458,351 $531,295 $388,948 15 $190,707 $223,499 $150,788 $471,912 $553,057 $400,788 16 $209,540 $248,334 $162,914 $486,107 $576,105 $412,914 17 $229,434 $275,028 $175,331 $500,950 $600,501 $425,331 18 $250,446 $303,724 $188,046 $516,451 $626,314 $438,046 19 $272,641 $334,575 $201,068 $532,628 $653,621 $451,068 20 $296,084 $367,748 $214,402 $549,505 $682,506 $464,402 26 $395,418 $548,802 $237,475 $645,418 $875,995 $487,475 31 $505,915 $770,921 $259,380 $755,915 $1,097,319 $509,380 36 $649,714 $1,089,420 $284,048 $899,714 $1,392,069 $534,048 41 $836,852 $1,547,285 $311,828 $1,086,852 $1,797,285 $561,828 46 $1,080,392 $2,203,314 $343,111 $1,330,392 $2,453,314 $593,111 51 $1,397,333 $3,141,360 $378,339 $1,647,333 $3,391,360 $628,339 56 $1,809,797 $4,482,660 $418,010 $2,059,797 $4,732,660 $668,010 Page 11 of 16
Things You Should Know: - An interest rate of 5.000% chosen by you and your advisor is within Sun Life Financial's range for the assumed primary interest rate (please see Fund Investment Options section). - An assumed alternate interest rate of 7.000% was chosen by you and your advisor for illustration purposes. - A rate of 2.000% was also provided in this illustration to demonstrate how this policy would perform in an interest environment lower than current levels. Page 12 of 16
Section 3. Illustrations - Plan Activity Summary Year Payments Less Withdrawals (based on an assumed primary interest rate of 5.000%) Provincial Premium Tax Charges Cost of Insurance Benefit Cost Interest Credits Discounts & Bonuses Year End Plan Value 1 $10,000 $200 $1,893 $0 $439 $0 $8,347 2 $10,000 $200 $1,893 $0 $867 $448 $17,569 3 $10,000 $200 $1,893 $0 $1,328 $486 $27,290 4 $10,000 $200 $1,893 $0 $1,814 $526 $37,537 5 $10,000 $200 $1,969 $0 $2,325 $583 $48,276 6 $10,000 $200 $2,063 $0 $2,859 $646 $59,518 7 $10,000 $200 $2,120 $0 $3,420 $703 $71,322 8 $10,000 $200 $2,153 $0 $4,010 $758 $83,737 9 $10,000 $200 $2,171 $0 $4,630 $812 $96,808 10 $10,000 $200 $2,266 $0 $5,282 $885 $110,509 11 $10,000 $200 $2,333 $0 $5,965 $954 $124,895 12 $10,000 $200 $2,381 $0 $6,684 $1,023 $140,021 13 $10,000 $200 $2,339 $0 $7,441 $1,076 $156,000 14 $10,000 $200 $2,296 $0 $8,241 $1,133 $172,878 15 $10,000 $200 $2,250 $0 $9,086 $1,194 $190,707 16 $10,000 $200 $2,202 $0 $9,978 $1,257 $209,540 17 $10,000 $200 $2,151 $0 $10,921 $1,324 $229,434 18 $10,000 $200 $2,099 $0 $11,917 $1,395 $250,446 19 $10,000 $200 $2,044 $0 $12,968 $1,471 $272,641 20 $10,000 $200 $1,987 $0 $14,079 $1,550 $296,084 26 $0 $0 $1,893 $0 $18,789 $1,919 $395,418 31 $0 $0 $1,893 $0 $24,031 $2,349 $505,915 36 $0 $0 $1,893 $0 $30,852 $2,908 $649,714 41 $0 $0 $1,893 $0 $39,728 $3,636 $836,852 46 $0 $0 $1,893 $0 $51,280 $4,583 $1,080,392 51 $0 $0 $1,893 $0 $66,314 $5,815 $1,397,333 56 $0 $0 $1,893 $0 $85,879 $7,419 $1,809,797 Plan Value is the Policy Fund Value plus the Service Account balance. Provincial Premium Tax of 2.00% (Ontario) is applied to each payment. Page 13 of 16
Section 3. Illustrations - Policy Taxation Summary This illustration assumes that current Income Tax Act (Canada) rules affecting life insurance will remain the same. It should be noted that these rules can change at any time. Year Net Cost of Pure Insurance (based on an assumed primary interest rate of 5.000%) Withdrawals Tax on Withdrawal* Adjusted Cost Basis Cash Surrender Value Tax on Surrender* Tax on Service Account* 1 $184 $0 $0 $9,816 $6,454 $0 $0 2 $207 $0 $0 $19,608 $13,784 $0 $0 3 $233 $0 $0 $29,375 $21,613 $0 $0 4 $258 $0 $0 $39,117 $31,860 $0 $0 5 $299 $0 $0 $48,818 $42,599 $0 $0 6 $358 $0 $0 $58,460 $53,841 $0 $0 7 $427 $0 $0 $68,033 $65,644 $0 $0 8 $500 $0 $0 $77,533 $78,059 $237 $0 9 $557 $0 $0 $86,976 $93,023 $2,722 $0 10 $623 $0 $0 $96,352 $108,617 $5,519 $0 11 $687 $0 $0 $105,665 $124,895 $8,654 $0 12 $766 $0 $0 $114,898 $140,021 $11,305 $0 13 $835 $0 $0 $124,063 $156,000 $14,371 $0 14 $908 $0 $0 $133,155 $172,878 $17,875 $0 15 $976 $0 $0 $142,179 $190,707 $21,838 $0 16 $1,078 $0 $0 $151,100 $209,540 $26,298 $0 17 $1,176 $0 $0 $159,924 $229,434 $31,279 $0 18 $1,298 $0 $0 $168,627 $250,446 $36,819 $0 19 $1,440 $0 $0 $177,187 $272,641 $42,954 $0 20 $1,632 $0 $0 $185,555 $296,084 $49,738 $0 26 $2,880 $0 $0 $171,397 $395,418 $100,809 $0 31 $4,540 $0 $0 $152,624 $505,915 $158,981 $0 36 $7,930 $0 $0 $120,516 $649,714 $238,139 $0 41 $14,171 $0 $0 $63,658 $836,852 $347,937 $0 46 $24,569 $0 $0 $0 $1,080,392 $486,177 $0 51 $38,456 $0 $0 $0 $1,397,333 $628,800 $0 56 $54,705 $0 $0 $0 $1,809,797 $814,409 $0 * Assumes a marginal tax rate of 45%. Page 14 of 16
The Cash Surrender Value includes any balance in the Service Account. Withdrawals include any transfers to the Service Account. Page 15 of 16
Section 4. Statement of Variability A SunUniversalLife policy is designed to be a flexible solution for my life insurance and investment needs. However, it is a complex financial product and there are many variables that can affect the policy s performance, including the following: the type and future investment performance of the investment option(s) selected the timing and amount of future payments to the policy the timing and amount of future cash withdrawals and loans from the policy future federal and provincial income tax rules. More specifically, interest rates and the performance of securities markets, in particular, can fluctuate significantly. Actual results will differ upward or downward from those illustrated, because they are highly dependent upon a number of variables (including those listed above) and even a small change in any of these variables could have a dramatic negative impact on the non-guaranteed figures shown in this illustration. This illustration will not become part of the policy and was provided solely to illustrate how policy values may change over time based on different sets of assumptions. Unless indicated as Guaranteed, the values in this illustration are not guaranteed, are hypothetical only and are based on assumptions that are certain to change. They are neither an estimate nor a guarantee of future policy performance. Page 16 of 16