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Back To Back Annuities, are more popular than ever. They are making a big comeback because of poor after-tax returns on guaranteed investments such as GIC's and bonds, and the uncertainty of the volatile stock markets. If you are retired or close to retiring and are looking for a steady stream of pension income, without the worries of outliving your savings, then a back to back annuity could be right for you.

What is a Back To Back Annuity?

A back to back annuity in it's simplest form is a combination of two products:  A fully guaranteed single life prescribed annuity combined with a fully guaranteed permanent life insurance policy. The combination of these two products can deliver extraordinary results. The annuity generally delivers a higher gross income than that produced by the GIC and is payable and guaranteed for life. You pay less tax on the income since prescribed annuities pay a blend of interest and capital as income, whereas a GIC pays out interest income only which is fully taxable. The proceeds from the life insurance policy replace the capital used to purchase the annuity and are paid out to the beneficiaries, free of probate, legal, and executor fees. Even after paying the insurance premium, you will have more net income than would be produced by investing the capital in GIC’s. 
Ask yourself the following questions:
  • Are you looking for better returns over traditional guaranteed interest products, like GIC’s and government bonds but don't want to take any risks?
  • Are you afraid you might outlive your retirement savings?
  • Are you using non-registered fixed income investments to supplement your retirement income?
  • Are guarantees important to you?
  • Are you becoming more and more frustrated with the increasing cost of living along with what low interest rates and the volatile stock markets are doing to your retirement income?
  • Do you find yourself losing sleep and worrying about market conditions?
  • Do you want to maximize your after-tax retirement income?
  • Are you in a high marginal tax bracket?
  • Do you want to preserve your wealth for your family?
  • Are you concerned about the transfer of your assets to the next generation?
  • Do you have a charitable urge?
If you answered "Yes" to any of these questions then a back to back annuity could be the answer.

The Challenge for Seniors

If you are retired or near retirement you are focused on both investment safety and returns for your investments. You want these investments to supplement your retirement income, so you want to obtain the best return while assuring your capital is guaranteed. This will often lead you to invest into guaranteed investment certificates (GIC's) and bonds. These provide a guaranteed rate of interest and secured capital. The one drawback of this investment is that all income is received as interest and therefore, 100% taxable.

A popular option to what is described above is the Back-to-Back Annuity. The annuity guarantees income payments for the rest of your life, and should you die prematurely, it can even guarantee that the payments will continue for a minimum number of years. Best of all you pay less taxes on an annuity income compared to a GIC or Bond interest income. Depending on your age and gender, your annuity income may qualify for a tax-free benefit

Benefits of the Back to Back Annuity:
  • Income guaranteed for life
  • Preferential tax treatment on the annuity income
  • Capital replaced at death and paid directly to heirs
  • Beneficiaries can be changed at any time
  • No Probate fees on life insurance death benefit

This strategy is most appealing to individuals who:
  • Are retired or are approaching retirement. A good age range for a back-to-back annuity is generally from age 60 to 80.
  • Have invested significantly in fixed-income investments to supplement their retirement income.
  • Are cautious with their capital and prefer fixed-income investments; although they are concerned that the interest income is 100% taxable.
  • Are hopeful to keep their capital intact to transfer to their heirs.
  • Are concerned about low interest rates, which can be distressing for older investors who need additional retirement income, but are locked into relatively low return from guaranteed interest investments.
  • Are concerned about fluctuating investment returns which cause their income levels to go up and down and would prefer to receive a steady stream of dependable income in retirement, without the worries of outliving their savings.
  • Are noticing that more and more of the health costs formerly picked up by the Ontario provincial government are now items that they have to pay for themselves-increased cost of living.
  • Are producing a significant amount of income which is taxed at the highest marginal tax rate, which can create a pension claw-back and reduce or eliminate their income from sources such as Old Age Security (OAS).
In today's economic environment, the popularity of back-to-back annuities is constantly growing and the response to this investment strategy has been overwhelming. Our goal is to continue to maintain a leadership role as Canada's provider of personal back-to-back annuities.

If you have any questions or comments or would like more information please contact us we are here to help.
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Any information contained in this website is intended as a general guide only and should not be considered the ultimate source for any of the information contained herein. You must undertake further research and must seek the advice of a qualified professional before taking any action related to such information. While we consider the information provided to be reliable at time of publication, we make no representations or warranties that the information contained in this website is complete, timely, or accurate. This information can become out-of-date. We make no commitment, and disclaim any duty, to update any of this information.

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