In today’s low yield environment many investors are looking for investments that provide tax-efficient cash flow. Series T units allow investors to draw on their investments for 5% (Series T5) or 8% (Series T8) annually† with distributions paid monthly. Series T units also offer investors an easy way to transition seamlessly from investing for long-term growth to drawing regular, tax-efficient cash flow.
1. Sustainable payouts – Distribution amounts are set at the beginning of each year so you know exactly how much you’ll receive each month. The monthly distribution resets each year to help mitigate the risk of capital erosion while supporting your long-term cash flow needs.
How the Series T5 Monthly Distribution is calculated
Monthly
distribution
(cents/unit)
Previous year December 31 Net Asset Value per unit x 5%
12 months
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In years when your fund increases in value, your distribution amount (in cents per unit) may rise for the following year and in years when your fund decreases in value, your distribution amount may be adjusted downward in order to re-establish the target payout rate.
2.Tax efficiency – Series T distributions are more tax efficient than redeeming your investment. They offer an attractive blend of tax-efficient income and tax-deferral benefits through the use of return of capital (ROC). ROC is used to top up the interest income, dividends, and/or capital gains earned by the fund to achieve the payout rate.
4. Transitioning from saving to cash flow
If you are an investor in another series of a fund, you may switch between the series you currently hold and Series T of the same fund at any time with no tax implications. This tax-free conversion may be particularly beneficial when transitioning to retirement.
If you have built up non-registered assets in a series other than Series T, you can now start drawing on your assets without triggering a capital gain or loss until the investment is ultimately sold.
Using a more traditional approach, such as a systematic withdrawal plan (SWP), would trigger capital gains in the current year if your investment has appreciated over time. This could be less tax efficient than receiving ROC as part of your cash flow.
3. Customizable cash flows – You can customize a monthly cash flow that meets your specific needs up to a fund’s maximum payout rate of 5 or 8 per cent annually by dividing your capital between Series T5, Series T8 and any other Series of the same fund.
For more information about whether Series T is right for you, talk to your financial advisor today.
In retirement and ready to start drawing from their non-registered investment
Looking to establish steady, tax-efficient cash flow
Expecting to be in a lower tax bracket in future years
Concerned about the clawback of government benefits (i.e. Old Age Security pension - OAS)