Planning for retirement is about more than just growing savings—it’s about making sure those savings are secure when you need them. In Canada, mutual funds and segregated funds are two common investment options used by pension plan members and individual investors.
A recent Canada Life survey shows that while both are popular, segregated funds enjoy more trust when it comes to meeting long-term financial goals.
Mutual Funds
Mutual funds allow investors to pool their money, with a professional manager choosing investments such as stocks and bonds. They are widely available through banks and investment firms and usually come with lower fees than other investment products. However, they do not offer guarantees—returns depend entirely on market performance.
Key points:
- Pooling of investor money
- Professional management
- Regulated under securities law
- Typically lower fees
- No principal protection
- Common in group retirement plans
Segregated Funds
Segregated funds also pool investors’ money under professional management but are regulated under insurance law. They typically include guarantees that ensure investors get at least their original amount back if they hold until maturity or death. Additional advantages can include creditor protection and bypassing probate, making them appealing for estate planning.
Key points:
- Pooling of investor money
- Professional management
- Regulated under insurance law
- Principal guarantees on maturity or death
- Possible creditor protection
- Can bypass probate for faster estate distribution
- Usually higher fees than mutual funds
Survey Findings
A Canada Life survey conducted by Abacus Data found:
- 63% of investors are satisfied with their mutual funds, but only 43% feel confident these will meet long-term goals.
- 74% of investors are satisfied with segregated funds, and 61% feel confident about their long-term performance.
The results suggest that while investors appreciate both products, they have greater confidence in segregated funds to support their future plans.
Comparison Table
| Feature | Mutual Funds | Segregated Funds |
|---|---|---|
| Regulation | Securities law | Insurance law |
| Fees | Generally lower | Generally higher |
| Guarantees | None | Principal protection at maturity/death |
| Creditor Protection | No | Often available |
| Estate Planning Benefits | No | Can bypass probate |
| Long-term Confidence | Lower (43%) | Higher (61%) |
Segregated Funds
- Guarantees protect capital even in volatile markets
- Estate benefits allow direct transfer to beneficiaries without probate delays
- Appeals to risk-averse investors who value predictability
- Rising inflation and market uncertainty make safety more attractive than high returns alone
Education Gap
The survey revealed that many Canadians—and some pension plan sponsors—don’t fully know the differences between mutual funds and segregated funds. Limited awareness, uncertainty about risk, and lack of clear advice keep some from exploring the benefits of each option.
Financial advisors can bridge this gap by offering education based on both emotional and financial needs, helping people choose investments that align with their security, legacy, and growth goals.
Ultimately, the choice between mutual funds and segregated funds is not just about returns—it’s about confidence, protection, and peace of mind in retirement planning.
FAQs
Do segregated funds guarantee my money back?
Yes, if held until maturity or death.
Are segregated funds more expensive than mutual funds?
Yes, they usually have higher fees.
Can mutual funds protect against creditors?
No, only segregated funds may offer this.
Why do people trust segregated funds more?
Because of guarantees and estate benefits.
Which is better for low-cost investing?
Mutual funds generally have lower fees.
