What is the definition of Guaranteed Income Contract (GIC)?
The Guaranteed Income Contract is an option that can be provided in an employer-sponsored retirement, profit-sharing or pension plan.
The Guaranteed Income Contract is between the employer (the plan owner) and the insurance company. It guarantees a specified rate of return within the duration of the contract. The insurance company is obligated to pay this interest rate, regardless of whether there is a market downturn. If the financial and investment markets do well, the insurance company may also add to this rate of return - but this portion of the rate of return is not guaranteed
This kind of option provides a very safe investment, but a lower rate of rate, by virtue that it is guaranteed. When the term of the guaranteed investment contract ends, it remains renewable, but the guaranteed interest rates may be changed, based on the current interest rates.
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