Leaving your pension plan

There are two primary pension plans we will chat about in this section; Defined Contribution (DC) and Defined Benefit (DB).  We will discuss the primary reasons people will remain with their pension plan vs utilize a Certified Financial Planner professional to manage their retirement. 

Defined Contribution Pension Plan's

These are pensions where the amount you put in is "defined", generally a percentage of your income which is matched by your employer.  Some examples of DC plans include PEPP, CSS, LAPP and U of S pension plans.  Here are some common factors people will consider when choosing to stay with or leaving their pension provider.

The case to stay with your Defined Contribution Plan provider:

  • You are comfortable managing your investments and rebalancing them periodically to adapt to changes in the market.

  • You have created a retirement income strategy that considers your Defined Contribution Plan, CPP, OAS and other individual retirement accounts.

  • You like spending time reviewing your investments and financial plan on a semi-annual basis to ensure you are still on track.

  • Change can be scary!

The case for leaving your Defined Contribution Plan provider:

  • You are not comfortable managing your retirement nest egg and want to spend less time worrying if you will be ok.

  • You understand the need for professional advice, but want to be sure you are receiving value for what you pay your CFP professional. 

  • You have been with pension plan for so long, you aren't really sure what other options are out there.

  • You do not have a retirement income strategy and are concerned you are paying too much tax!

  • Complex scenario's may need greater attention to detail and you want to be sure you get things right the first time.

 

Where we come in:

  • We have helped many retiree's and those changing careers transition pension plan's to our team.  Helping you with your transition includes reviewing your retirement package (health benefits, severance, stock etc.)

  • We customize a retirement income strategy that factors in your own personal scenario.  This includes CPP timing, TFSA maximization, retirement income tax minimization and reducing estate taxes.

  • We facilitate the transfer your pension using a Locked-in Retirement Account (LIRA), you don't have to process any paper work.

  • Superior investment options:

    • We offer a "Personal pension plan" option with superior investment managementthrough a program called iProfile.

    • Competitive Management Expenses Ratio 

      • iProfile Moderate - MER 0.46%*   VS   PEPP Balanced fund 0.66%** 

Want help reviewing your retirement package and creating a retirement income strategy?  Check out our FREE ASSESSMENT today!

Defined Benefit Pension Plan's

Defined Benefit plans are becoming less and less common in todays work place.  Generally speaking, these plans are most common if you work in public services, such as a police officer, nurse or city employee.  These plans have come under immense solvency pressure over the last few years with falling interest rate, baby boomers retiring and overall longevity of the plan members. 

 

What does this mean? Do they have enough new money coming to reduce the stress of withdrawals?  Is the pension plan's underlying investment keeping pace with inflation?  Will the pension plan be there for me when I am 90 years old?  (Does Sears ring a bell?)

 

Before I get to the next section, please understand the decision to take your pension VS commuted value is very complex.  Every pension plan has their own nuanced rules, bridge benefits, indexing, survivor income, plan solvency etc.  The following are general considerations when making the decisions, not advice specific to your situation.

The case to take your Defined Benefit Plan option:

  • You have a low tolerance for investment risk and are uncomfortable with fluctuations in your investments.

  • Based on your retirement income needs, the combination of your pension, CPP and OAS will match your lifestyle needs.

  • The pension plan is solvent.  There is very low risk of my pension defaulting on my benefit.

  • I have a spouse, who would benefit from from a potential survivor benefit.

  • You may not have an option!  In some cases, you have to make the decision years before you retire.

The case for taking the commuted value of your pension:

  • You are comfortable with moderate risk in your investment portfolio and potential changes in income.

  • You have no spouse and/or a do not have longevity in your family. 

  • There is a strong chance you will continue to work part time to supplement your income and stay busy. 

  • It is important to have a family member benefit from the pension plan.

  • You would prefer to have control over your money.

Where we come in:

  • We complete a 20 point checklist to compare the pension options (Benefit vs lump sum). 

  • Analysis of pension package.  Including statement of options, severance, stock options, health benefits and potential taxable benefits.

  • Complete a thorough review of the probability or your retirement success. Can you still retire if there was a significant market downturn?

  • We customize a retirement income strategy that factors in your own personal scenario.  This includes CPP timing, TFSA maximization, retirement income tax minimization and reducing estate taxes.

  • If the lump sum option is in your best interest, we facilitate the transfer using a Locked-in Retirement Account (LIRA), you don't have to process any paper work.

  • Review investment options that will be cost effective while providing a strong risk adjusted rate of return that will increase your probability of retirement success.

👉 Want to learn more about your pension options before entering retirement? Click here to get your Free Retirement Assessment.

 

*Dec 2020 Moderate iProfile Private Pool (28% Canadian Equity, 17% US Equity, 15% International Equity, 40% Fixed Income)

https://www.investorsgroup.com/en/investments/solutions/iprofile-private-portfolios

**PEPP Fund facts June, 2020 http://www.peba.gov.sk.ca/sites/default/files/fileadmin/storage/peba/pensions/pepp/investments/fund_facts/balanced.pdf

 

Investors Group Securities Inc

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