Buying segregated funds

Question: I have just had a visit from a Clarica Life Insurance Co. agent who talked about buying segregated funds. He made it sound that these funds are too good to be true in terms of avoiding foreign content of your RRSP, avoiding Estate Administration Tax when I die, etc. What are the pros and cons of using these types of funds as part of your RRSP? The increased one time fee of 0.1% does not seem like a lot to pay.


Segregated funds do offer a number of benefits, including guarantees of principal and estate planning benefits. However, you always have to take things that are said in a sales pitch with a grain of salt.

Take the foreign content issue, for example. It is true that, right now, the foreign content rules don’t apply to seg funds because of an administrative oversight. However, the federal government is on record as saying that seg funds will be subject to the same rules as regular mutual funds, starting in 2001. So this is a very short-term advantage.

As with any other investment, you should look at the performance of the fund family and compare it with other alternatives before you make a decision. If it’s seg funds yowant, does Clarica offer the best choices? If you check Gordon Pape’s 2000 Buyer’s Guide to Mutual Funds, you’ll find a number of other seg fund families that we also think are worth a look, including Great-West Life, London Life, Manulife, ING Life (formerly NN), Primerica Life, Royal and Sun Alliance, and Standard Life. Also look at Transamerica Life, which has some very hot funds right now.

In short, there are many very good options available. Clarica is one of them, but do your homework before making a commitment. Seg fund investing is a long-term thing, and it’s important to get it right.