Conceptionally, VPLAs would allow Canadians to convert all or part of their retirement savings nest egg into a low cost and reliable monthly income stream, writes CLHIA's Stephen Frank
Canada is in the midst of its largest retirement wave as two-thirds of baby boomers have reached retirement age, with the remaining boomers reaching retirement age by 2030. While there’s a lot of focus on how this demographic phenomenon will impact the labour force, another important aspect is to ensure these retired Canadians have secure and adequate income for life.
Retirement marks a new beginning for Canadians – including how they think about money. Many will find themselves sitting on their nest egg, wondering how to use what they’ve saved and how to make sure it doesn’t run out. The transition from the savings years to the spending years means converting their savings into a reliable income stream, which isn’t an easy feat.
It is impossible to know the length of retirement, so many individuals are overly cautious in their spending habits out of fear that they’ll outlive their savings or require expensive late-in-life care. The result? Retirees aren’t reaping the rewards of their hard-earned savings.
The answer? A new affordable option for Canadians to turn their retirement savings into a lifetime income stream. Welcome to the world of Variable Payment Life Annuities (VPLAs) – also referred to as Variable Life Benefits (VLBs) and Variable Life Payments (VLPs).
Conceptionally, VPLAs would allow Canadians to convert all or part of their retirement savings nest egg into a low cost and reliable monthly income stream – similar in many respects to that enjoyed by members of defined benefit (DB) pension plans and resembling a pay cheque that they’re used to (although income from VPLAs varies within a certain band from year to year).
The major benefits of VPLAs are that they allow retirees to continue to benefit from market growth while ensuring they receive income throughout their lifetime (and possibly their spouse’s lifetime) – they’ll never run out. So these products will help Canadian retirees optimize retirement spending and stop worrying about outliving their savings.
The positive impact VPLAs could have is significant. By 2050, 13.2% of people over 65 in Canada may be living with dementia.These numbers suggest that many retirees may not be able or willing to manage their investments effectively and/or manage their retirement income needs accurately as they get older. VPLAs can offer peace of mind to both retirees and their families. Studies have shown that having a secure and reliable source of income can help reduce financial anxieties and address the problem of underspending.
VPLAs can provide retirees with an income stream that is higher than a regular life annuity, since VPLAs pool investment and longevity risks (among VPLA members) to provide lifetime income, instead of using the more costly insured guaranteed approach of traditional annuities. This enables VPLA members to receive more retirement income for the same amount of accumulated retirement savings.
Before we get too excited however, we need to understand that VPLAs have been in the works since 2019 when they were first announced in the federal budget. Since then, legislative amendments have been introduced, but we are still far off from seeing these products in the market.
The Quebec government has seen the most progress. They have introduced draft regulations in May 2025 that would allow members of an employer-sponsored pension plan or a Voluntary Retirement Savings Plan to transfer their retirement savings into a VPLA. However, for these products to be successful and widely available across Canada, more work needs to be done at all levels of government.
A single, Canada-wide pooled solution for VPLAs should be permitted under both federal and provincial legislation to ensure a common principles-based approach to VPLA regulations and harmonized experience for Canadians, regardless of where they live. This will also help achieve scale, manage administrative costs, and diversify risks.
No doubt, completing this work is a complex process, but governments need to accelerate and coordinate their efforts on this important national policy initiative. We need a viable framework and model that is harmonized federally and provincially, accessible, and wide-reaching to as many Canadians as possible.
As a call to action, the CLHIA strongly encourages federal and provincial governments to make VPLAs a priority. Our members are uniquely positioned to help Canadians achieve financial security, and we are committed to working with government to help ensure that VPLAs provide a viable retirement income solution.
If designed and executed properly, VPLAs will not only provide Canadians with a reliable source of lifetime income as part of their overall retirement plan but will also help strengthen Canada’s retirement system.
It’s time for governments to act so Canadians can retire with confidence.
Stephen Frank is the president and CEO of the Canadian Life and Health Insurance Association. He advocates on behalf of Canada’s life and health insurance sector for policies and perspectives that contribute to a sound, successful insurance system for the benefit of all Canadians.
