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(December 3, 2007) Industrial Alliance Insurance and Financial Services announced Monday the launch of Ecoflextra, a retirement product that offers protection and growth features.

Ecoflextra is a type of guaranteed minimum withdrawal product that provides a retirement income guaranteed for life while allowing clients to profit fully from all the growth potential of the market.

Bruno Michaud, IA’s senior vice-president, administration and sales, says investors are looking for ways to protect their nest eggs from three major market risks: the risk of depleting their investments during their lifetime, the risk of diminished purchasing power due to inflation and the risk of a sizeable decline in the value of their investments following a downturn in the stock markets.

“Ecoflextra offers a solution to manage all these risks. It provides a lifetime retirement income that is secure and predictable, with the possibility for investors to profit from potential market upswings, and even to take advantage of a bonus. Ecoflextra is therefore the ideal investment tool for a retirement without financial worries,” Michaud says.

Ecoflextra provides annual retirement income equivalent to 5% of investments for life or for a minimum period of 20 years. It also offers a yearly bonus of 5% of the guaranteed income for the first 15 years if no withdrawal is made during the year, which gives the investor a yield that can reach 75%, no matter the market returns.

Investors have access to 38 investment funds. Aggressive investors who want to invest 100% of their funds in stocks can do so at age 65 by choosing an income guaranteed for a 20-year period.

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EI flawed: Actuaries

(December 3, 2007) Canada’s Employment Insurance system needs significant reforms, according to a report conducted by the Canadian Institute of Actuaries.

The report, A Look Back and a Way Forward: Actuarial Views on the Future of the Employment Insurance System, concludes that the current financing approach to the EI fund is flawed.

“The essential character of the EI program, since its inception, is that it is an insurance program. Premiums contributed to the program, and resulting surpluses, belong to the program,” says the institute’s president, Michael Hale. “Unfortunately, we have gotten away from that principle over the years, but perpetuating the existing financing structure is inappropriate.”

The report urges the federal government to create a new, independent governance body to take over responsibility for funding, investment and borrowing policies of the EI system. The institute says a new body would have broader representation from worker and employer groups than the current EI Commission, as well as more public interest representatives, including an actuarial nominee.

The report also contends that the current premium-setting process is confusing, lacks transparency and credibility, and grants little or no independence to either the EI Commission or its actuary, whose role is severely constrained. The institute advocates a process in which premium rates would be set independently by the new body, which would establish and manage a separate investment fund.

“The strategy for setting premium rates and investing reserve funds would be the sole responsibility of the new entity, and would be based on principles-based actuarial advice to ensure the fiscal integrity and long-term viability of the fund when times are good or when times are bad,” said Hale. “To ensure accountability and transparency, the new entity would report to Parliament. Benefit policies and the operational delivery system would remain the responsibility of government.”

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ASC bans B.C. resident from trading

(December 3, 2007) It seems the Alberta Securities Commission doesn’t want to have anything to do with British Columbia’s bad apples. The ASC has banned a B.C. man from trading in Alberta, even though he has no plans to move to the province, because it believes he poses a risk to Alberta’s investors and the Alberta capital market.

The ASC has imposed a 12-year ban against Enrique (Henry) Rempel, barring him from trading in or purchasing securities, using Alberta Securities Act exemptions and acting as a director or officer of any issuer.

The ASC decision is based on a British Columbia Securities Commission (BCSC) order of June 29, 2007, that imposed sanctions on Rempel, including a 12-year trading ban.

The BCSC order stemmed from Rempel’s raising of approximately $3.6 million from 37 people through illegal trades and distributions of various securities. Evidence presented to the ASC panel showed that two of these investors were Alberta residents who had invested approximately $15,000.

In its decision, the ASC panel noted that even though Rempel has no plans to move to Alberta, “his past conduct nonetheless persuades us that something more, by way of protective and deterrent orders, is in the interest of the Alberta public. Otherwise, we are concerned that Rempel, or others, could engage in similar misconduct and expose Alberta investors and the Alberta capital market to further harm.”

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Many Canadians unsure of how much to spend on home

(December 3, 2007) When asked what percentage of gross household income a homeowner should set aside for housing costs, 44% of Canadians select amounts deemed to be too high or too low based on mortgage lending standards, according to a new Angus Reid survey.

The survey, commissioned by Mortgage Intelligence, a Canadian residential mortgage brokerage, was designed to determine how closely Canadians’ perceptions of housing affordability are aligned with gross debt service (GDS) ratio guidelines.

According to Mortgage Intelligence, a GDS ratio for monthly housing costs — which includes mortgage principal and interest payments, property taxes and heating expenses — should not exceed 32% of gross household income at the high end.

Of the more than 1,000 respondents, 47% correctly selected a range of 20% to 32% of gross income for housing costs. About 27% of respondents underestimated the amount of gross income a homeowner should set aside for housing expenses, estimating 20% of gross income or lower.

“Canadians whose monthly housing expenses exceed a maximum GDS ratio of 32% risk overextending themselves and could face challenges in meeting their mortgage obligations, while those who underestimate housing costs may be taken aback by the reality of rising housing costs in Canada,” says John Schipper, president of Mortgage Intelligence. “It’s important that homebuyers properly evaluate their current financial situation and seek proper guidance about what they can truly afford.”

Mortgage Intelligence also notes Canadians should be aware of another important financial measure for home affordability: the total debt service (TDS) ratio. In addition to housing costs, this ratio also takes into account debt payments on bank loans, car loans, credit cards and other regular commitments, including alimony or child support. Typically, lenders require that a borrower’s TDS ratio not exceed 40% of his or her monthly gross income.

“Online tools, such as mortgage calculators, are a good starting point for homebuyers to determine appropriate housing budgets, but they shouldn’t stop there,” added Schipper. “A one-on-one consultation with a mortgage professional will help borrowers define a plan that ties home ownership dreams to personal and financial goals.”

(12/03/07)