MPIP Investment pools help investors with significant assets realize more value. This exclusive program considers all of the investment accounts within your household and MPIP Investment Pools deliver everything you would expect from an investment program, including management fee reductions and tax efficiency. In addition, you can realize this value while continuing to work with the advisor you know and trust.
A household balance is determined by combining and linking all of the assets of the pools held within your household. These accounts can include your spouse1 and other family members residing at the same address. It can also include corporate accounts where a qualifying household member beneficially owns more than 50 per cent of the corporation’s voting equity.
Management Fee Reductions (MFRs)
MPIP Investment Pools reward higher investment amounts with lower management fees. They include household account-linking, which combines all of the account balances in a client’s household to potentially qualify for an even greater Management Fee Reduction.If the aggregated household assets invested in the pools exceed $250,000, every account within the household benefits from the MFR.
Management fee reduction*
|ACCOUNT/HOUSEHOLD VALUE TIERS|
|Tier 1||Tier 2||Tier 3||Tier 4||Tier 5|
|CATEGORY||$250K+ TO $499,999||$500K+ TO $1999,999||$1M+ TO $4.9M||$5M+ TO $9.9M||$10M+|
|All Qualifying Investments**||2.5 basis points||5 basis points||7.5 basis points||10 basis points||12.5 basis points|
*Management Fee Reduction rates that are listed do not include applicable HST. A basis point (BPS) is a unit that is equal to 1/100th of 1 per cent, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. Plus applicable HST (Series level).
**Management Fee Reductions can be applied to Manulife mutual funds, Manulife private mutual funds and Manulife Private Investment Pools; these are known as “qualifying investments” offered by simplified prospectus or confidential offering memorandum and subject to the eligibility requirements described therein.
The MPIP Investment Pools in corporate class structure provide three distinct ways to help pay less or defer tax on non-registered investments:
1. Tax-efficient growth/income
2. Tax-efficient rebalancing2
3. Tax-efficient cash flow using Series
1. Tax-efficient growth and income
In a mutual fund corporation, income and expenses of each individual corporate class is grouped together rather than being reported and taxed separately. This enables corporate class pools to share losses, expenses and loss carry forward amounts to reduce or defer taxable distributions generated by the corporation as a whole – this helps non-registered investors defer taxes and increase their investments’ growth. When corporate class distributions are made, they tend to be more tax efficient than distributions from traditional mutual fund trusts. This is because pools that are in corporate classes can only distribute ordinary Canadian dividends and capital gains dividends, both of which are taxed at a more favourable rate than fully taxable income such as interest or foreign income.
2. Tax-efficient rebalancing
Within a non-registered account, when investors switch from one mutual fund trust to another, they will be taxed on any realized capital gains from the taxable switch. With corporate class pools, however, the investor can switch between any two corporate class pools without realizing any capital gains. This is because all of the class pools are held within the same corporation and tax entity.
3. Tax-efficient cash flow using Series T
The pools can be purchased as Series T shares for those investors who would like to receive a regular monthly cash flow3, which generally consists of return of capital (ROC), from their investments. The ROC is tax-free and it will lower the adjusted cost base (ACB) of the class pool shares. Once all of the investor’s capital has been returned, subsequent ROC cash flows will be treated as capital gains and taxed at a favourable rate.
1 The term spouse includes common-law partner as these terms are defined by the Income Tax Act (Canada).
2 On March 22, 2016, the Federal Government's budget announced that an investor in one corporate class fund will no longer be able to switch to another corporate class fund without realizing a taxable capital gain or loss in their taxable accounts. This change will be effective January 1st, 2017. Until the change becomes effective, switches between corporate class pools will continue to occur on a tax-deferred basis.
3 Distributions are not guaranteed.