LLQP Calculation Questions: Needs Analysis, Tax and Annuity Math
Calculations are a minority of LLQP questions, but they are reliable marks if you practise them. A calculator is supplied in BC. The examples below are our own, worked step by step.
1. Capital needs (Life)
Worked example
Client needs: mortgage $380,000, final expenses $25,000, education fund $40,000.
Total capital need: $380,000 + $25,000 + $40,000 = $445,000.
Subtract existing coverage that would be paid, e.g. $150,000 group life: $445,000 - $150,000 = $295,000 of new coverage.
2. Future value of expenses (Seg Funds)
Worked example
Expenses today: $60,000 a year. Inflation assumed at 2.5% for 10 years.
Future value = $60,000 x 1.025^10 = $76,805 (rounded).
3. Policy gain on surrender (Life tax)
Worked example
Cash surrender value $48,000; adjusted cost basis (ACB) $31,500.
Policy gain = $48,000 - $31,500 = $16,500, included in the policyholder's income (Income Tax Act s. 148).
4. Segregated fund maturity top-up
Worked example
Deposit $100,000 with a 75% maturity guarantee: guaranteed $75,000.
Market value at maturity $68,000. The insurer tops up $75,000 - $68,000 = $7,000.
5. RRIF minimum withdrawal
Worked example
The minimum is the RRIF's value on 1 January times a factor set by Income Tax Regulations s. 7308.
Age 71 at the start of the year: factor 0.0528. On $250,000: $250,000 x 0.0528 = $13,200.
Under age 71 the factor is 1 / (90 - age).
Frequently asked questions
Is there math on the LLQP exam?
Some: needs analysis, policy gains, guarantee top-ups, annuity and RRIF figures, and future values. A calculator is supplied in BC.
What is the RRIF minimum at age 71?
5.28% of the value at the start of the year (Income Tax Regulations s. 7308(4)).
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