Re: “High costs of GIF contract,” Letter to the Editor by Doug Corner (IE, Mid-November 2006).

Doug Corner has confused several Manulife Financial Corp. products and is layering the costs of two products onto each other. The management expense ratio he quoted was 3.71% and was for a GIF Series 2 MER, which is from a product we launched in 2001. That MER includes the guarantee costs associated with the maturity and death benefits available within that contract.

Manulife launched GIF Select featuring IncomePlus on Oct. 23, a new product with a guarantee option not previously available in Canada. IncomePlus, a guaranteed minimum withdrawal benefit, has been successful in the U.S. As it is a new type of guarantee, Manulife created a new product and a new method of pricing the guarantee. The new contract is called GIF Select. It is possible the use of the GIF name within GIF Select is the basis for Corner’s confusion.

The GIF Select contract has a 75 Series option with appropriate pricing for a 75% maturity and 75% death benefit option. The fund quoted by Corner is not available within the GIF Select contract and so the fee quoted by him is erroneous. For instance, one of the most popular funds within the GIF Select product is the Manulife Balanced Simplicity GIF Select 75 Series, with an MER of 2.55%. If the consumer wishes to purchase the IncomePlus option, which is Manulife’s name for a GMWB, they would pay an extra 0.55% for a combined fee of 3.1%, which is much less than that the 4.46% quoted by Corner.

Paul Partridge
Product director, Segregated funds
Manulife Investments