Cut the Crap Investing

Canadian retirees get a nice raise thanks to the Purpose Longevity Pension Fund.

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

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.

Purpose Investments Presentation

Canadian retirees are not necessarily well served by the financial institutions in the retirement stage.

Purpose Investments Presentation

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.

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.

Join us at Retirement Club

Check out this overview of Retirement Club for Canadians. Use the Contact Dale form if you’d like an online tour of Retirement Club, or if you’d like more information. I can also send you sign-up information. The cost is $250 per year. There is no obligation of any additional payments, though you may choose to stick around a while.

You can also follow this blog, it’s free. Newsletters, plus other free content and ‘ideas’ will be delivered to your email inbox. Enter your email in the subscribe area, or ‘join us today’ on the home page.

ETF Portfolios / Stock Portfolios / Retirement Strategies / Wealth Creation/ Retirement Club

Thanks Partners

Earn a break on fees by way of many of these partnership links.

Here’s Canada’s top-performing Robo Advisor, Justwealth. You can get advice, planning and low-fee ETF portfolios all at one shop. You can have it all.

Consider Justwealth for RESP accounts. That is THE option in Canada with target date funds that adjust the risk level as the student approaches the College or University start date.

OUR SAVINGS ACCOUNTS

Make your cash work a lot harder at EQ Bank. RRSP and TFSA account rates are at 1.50%, other savings rates up to 3.0%. You’ll find some higher rates on GICs up to 3.45%. They also offer U.S. dollar accounts at 2.75%. We use EQ Bank, they have been awesome.

OUR CASHBACK CREDIT CARD

We make between $40 to $70 every month! And that’s on everyday spending. There are no fees with …

The Tangerine Cash Back Credit Card

For August we received $51.24 in cash from everyday spending. You can select 3 categories for 2.0% cash back. All other categories pay at 0.50%.

That cash went into my TFSA account to help buy some CBIL-T, CHPS-T and HURA-T.

Retirement Club

It is a series of monthly Zoom Presentations, newsletters, plus a secure and private online space where we learn, share ideas and connect with members. Here’s the Retirement Club overview page. This past week we conducted a retirement cash flow review and plan for a club member who thought she might be spending in the $60,000 annual (after taxes) area. The cash flow plan shows a safe spend rate is likely in the $90,000 to $95,000 range.

Make sure you’re doing retirement right. It’s also suitable for those who are approaching retirement. Use Contact Dale if you’d like more info, or to sign up for the next group.

While I do not accept monies for feature blog posts please click here on the mission and ‘how I might get paid’ disclosures. Affiliate partnerships help me (try to) pay the bills for this site. But they don’t, ha. That will allow me to keep this site free of ads and easy to read.

Exit mobile version