Office of the Superintendent of Financial Institutions
The Office of the Superintendent of Financial Institutions (OSFI) is issuing the
Instruction Guide on Buy-in Annuity products (the Instruction Guide). The Instruction Guide provides information to assist administrators of pension plans with defined benefit provisions that are registered, or have filed an application for registration, under the
Pension Benefits Standards Act, 1985 (PBSA) with respect to the considerations and reporting requirements of buy-in annuities.
The Instruction Guide updates the Guidance published in September 2012, and includes:
OSFI issued a draft version of the Instruction Guide (the Draft Guide) for consultation on August 31, 2022. We carefully reviewed all comments received and present them in the annex as well as how they were addressed. We thank those who participated in the consultation process.
Questions and comments concerning any of OSFI’s requirements or expectations set out in the Instruction Guide may be sent to
Insurance and Pension Supervision
Pension plans may buy an annuity with a different arrangement than a single lump-sum payment.
The Instruction Guide was updated to reflect a more general payment arrangement.
Although not common, active members could be included in the buy-in annuity contract coverage in respect of accrued pension benefits.
The Instruction Guide was updated to reflect this possibility.
A reference to previously published OSFI guidance on other de-risking products such as longevity swaps should be added.
A general reference to OSFI’s website was added to the Instruction Guide to account for existing publications and the eventuality of new publications on de-risking products.
The requirements for the inclusion of the value of buy-in annuities in financial statements should be addressed.
Pension Benefits Standards Act, 1985 (PBSA) stipulates that financial statements must be prepared in accordance with generally accepted accounting principles. OSFI will consider adding a line for “insured annuity contracts” in its upcoming review of Certified Financial Statements (OSFI 60).
The inability of a foreign-purchased buy-in annuity to be converted to a buy-out annuity should be mentioned.
The Instruction Guide was updated to reflect this specification.
The addition of a member audit in OSFI’s expectations for plan administrators considering a buy-in annuity should be added.
The Instruction Guide was updated to clarify OSFI’s expectations regarding the completeness and accuracy of membership data.
The Instruction Guide’s intention regarding the review of the contract should be clarified, particularly since an annuity purchase contract is generally not subject to changes.
Section 1.1. of the Instruction Guide was updated to clarify OSFI’s intention with regards to the monitoring and reviewing of the contract as an investment of the plan.
The context in which certain liability valuation approaches may be used could be clarified. In addition, the methodology described for the use of a replicating portfolio under a going concern basis is not appropriate and creates disparities with the solvency valuation.
The Instruction Guide was updated to clarify OSFI’s expectations regarding acceptable approaches to value liabilities covered by the buy-in annuity contract. Moreover, the Instruction Guide was clarified with respect to the elements to be considered when using a replicating portfolio approach under a going concern basis. These elements apply for the valuation of the liabilities covered by the buy-in annuity contract only.
The separate disclosure of termination expenses related to the buy-in annuity contract should be consistent with the treatment of other investments.
OSFI considers that the expenses related to the buy-in annuity contract to be of particular interest and expects separate disclosure in the actuarial report.
The termination of a buy-in annuity contract for a surrender value is contingent on the provisions of the buy-in annuity contract.
The Instruction Guide was updated to reflect this precision.