It’s possible that the game has been changed for the better, for Canadian retirees. Purpose Investments launched a retirement funding mutual fund that is designed to deliver an annual payout at 6.15%. That is, the fund would pay out a minimum of 6.15% of your initial total fund value. For every $100,000 that you have invested, you would receive an annual payment $6,150.00. We might think of it as a pension, for those who do not have a pension. Introducing the Purpose Longevity® Pension Fund.
Post updated: October 2025.
The Purpose Longevity Pension Fund offers the pension model, now available to the typical investor. Advisors are able to use the fund by way of an F-series or A-series. Self-directed retirees can also purchase the fund directly at some brokerages including a few bank brokerages, you’ll find a graphic later in this post.
For many Canadian retirees it will certainly be a game changer.
Income for life
One of the greatest fears for retirees is running out of money. And most retirees don’t want to manage their own investments. They want to enjoy life, without financial worry. The Purpose Longevity Pension Fund will allow Canadians to top up their Canada Pension Plan and Old Age Security payments. Retirees may have other private pensions and other assets within the mix. The fund will allow a retiree to pensionize a large percentage of their liquid assets. They might pair the Purpose Longevity Fund with annuities.
Pensionize your nest egg with annuities, your super bonds.
The approach would remove much or some of the stock and bond market (volatility) risk. Of course, it will depend on your overall retirement income mix.
And more importantly perhaps, it would remove the risk of investors messing up their retirement portfolio (and retirement funding) by way of bad behaviour. We know that retirees with more conservative portfolios feel the freedom to spend more.
The Purpose fund sits between the Vanguard VRIF ETF retirement funding solution and the traditional annuities. The Vanguard ETF is designed to pay out at a 4% rate of the portfolio value, adjusted each year based on market performance.
An annual 6.15% payment (at age 65) is a big step up the retirement funding ladder.
When a retiree manages their own investment portfolio they will often use the 4% rule as a benchmark for the level that the portfolio can safely deliver retirement income, including an annual inflation adjustment. On Boomer and Echo I had offered …
The 4% rule. Is there a new normal for Canadian Retirees?
The Purpose Longevity Fund Overview
AI offered a very nice summary –
The Purpose Longevity Pension Fund aims to provide Canadian retirees with a sustainable source of income for life. It addresses the retirement income gap by offering a unique mutual fund structure that pools longevity risk, similar to a defined-benefit pension, to deliver increasing monthly distributions designed to keep pace with inflation. The fund provides stability and confidence for retirees by ensuring a continuous income stream. If an investor dies and has unpaid capital, likely in the first 15 years, they would get that back as the redemption value for their units.
Key Purposes and Features
- Income for Life: The primary goal is to provide consistent monthly income to retirees for as long as they live.
- Longevity Risk Pooling: It uses a pooling structure, similar to a traditional pension fund, to spread the risk of living a very long life across all investors in the fund.
- Inflation Protection: The income distribution levels are designed to increase over time, helping to offset inflation and maintain purchasing power.
- Unpaid Capital and Estate Benefits: If an investor passes away, their estate receives the remaining, unpaid capital, while the portion of “returns” that has not been distributed to the investor remains in the pool for the benefit of the remaining members.
- Two Classes: The fund has two main classes: an Accumulation Class for those still saving for retirement and a Decumulation Class for those over 65 who are retired and receiving income.
- Flexibility and Redeemability: Unlike some annuity products, investors can redeem their investment for its Net Asset Value at any time, providing flexibility.
Longevity risk is real and surprising. Fraser Stark of Purpose Investments delivered a wonderful Zoom presentation for Retirement Club, it included this chart …
To help you read that chart, if you live to age 65 you stand a 25% chance of living to age 92 to 115. We need to protect against longevity and rising healthcare and shelter costs that can arrive in our latest stages of life.
Everything changes in the decumulation stage
Life changes and priorities change when we switch to the retirement or decumulation stage. Retirees just want to get paid.
Canadian retirees are not necessarily well served by the financial institutions in the retirement stage.
At Retirement Club for Canadians we offer this graphic on the income sources in retirement. The Purpose Fund is a hybrid, part of personal savings (portfolio) but looking to move into the Pension pillar.
For those without an employer pension our pension-like assets can include …
CPP / OAS + Annuities + Purpose Longevity Pension Fund
The pension model for the masses
How does a fund pay out at a 6.15% rate (and potentially to increase) while studies show that a balanced or conservative investment mix can only ‘safely’ pay out at a 4%-4.5% level? Once again it follows the model used by pension funds (public and private) around the world.
I asked Som Seif, CEO of Purpose Investments to deliver an explanation.
It is based on what they call Longevity Risk Pooling. The difference between the required return on the fund (net 3.5%) and the income paid to investors (6.15%+) is because when people buy, they get their income, but as some people redeem/pass away earlier, they leave behind in the pool their returns on their invested capital (ie they get their unpaid capital out upon death or redemption). These returns left behind reduce the total return required to provide the income stream for all investors.
Som Seif
It is the pooling of funds by the collective group of investors that will hold the fund, that delivers the secret sauce. There is retirement funding strength in numbers.
This is called Longevity Risk Pooling (or sharing).
And as per the above quote, the underlying fund holdings only have to deliver at an annual 3.5% rate of return for the Purpose Longevity Pension Fund to deliver on the 6.15% funding level. Here’s ‘the how’ …
If you put in $500,000. After a number of years you receive distributions of $200,000, but then you pass away. Your estate would receive the unpaid capital of $300,000 ($500k-$200k). The return on the invested capital would stay in the pool for the benefit of all of the investors remaining. This return would reduce the overall required return for everyone.
Som Seif
The approach has been back tested
Morneau Shepell conducted extreme stress testing on the model, which included the use of their economic scenario generator (ESG) that produced over 2,000 different simulations of future paths of economies and financial markets.
You’ll find the recent actuarial review from Telus Health in the annual report.
This chart shows the best and worst and median probability over time as per Telus Health’s stress-testing methodology. At year 0 represents the distribution level of $6.33 per unit at September 30, 2024. The median range (grey area) shows a generous distribution increase to the area of $12 to $17.
Here’s more on the probabilities of payouts …
Purpose Investments can reduce income levels to ensure that the assets are never depleted and that income payments can continue to unit holders for their lifetime.
Net, net, the payments could move higher or lower. The risk will be managed, while any benefits offered by the markets will be passed along to investors. They are employing a variable withdrawal strategy. If the markets deliver exceptional results, targeted payouts (or even more) will be met. If we move through a serious recession and market declines, the fund will deliver less income to ensure payments to continue for life.
The fund series
There will also be a D-series available for self-directed investors.
The game changers combo offering
We often refer to the one ticket asset allocation ETFs as game changers. For use in the accumulation stage (wealth building) Canadian investors can hold comprehensive all-in-one portfolio ETFs with fees in the range of 0.20%.
The good news is that we also know that global balanced portfolios work in retirement as well. We can pair an asset allocation ETF with pensionable assets.
And now enter the Purpose Longevity Pension Fund that might turn out to be the next piece in the game changing investment landscape.
- Accumulation: AA ETFs
- Decumulation: Purpose Pension Fund / Annuities / AA ETFs / CPP and OAS
Recent performance for the Purpose Longevity Fund
You can find the performance update in this link. There is also a PDF to download.
Here’s the current payout yield by age cohorts.
The fund has increased distributions, and given the performance so far in 2025, if that holds, another income boost would be on the way.
How to purchase the Purpose Fund
From the following list we can see that self directed investors can access the fund through BMO, National Bank, Questrade and QTrade discount brokerages.
Thanks for reading. Add your thoughts and questions in the comment section or reach out by way of that Contact Dale button.
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