Employer Pensions
If you contributed to a company pension plan during your working life, you may be entitled to receive regular pension income from your employer.
There are currently several different types of company pension plans in effect, with the most popular being:
If you belong to a company pension plan, learn all you can about your entitlements - including the answers to our Six Key Questions to Ask regarding your company pension income and benefits.
Defined Benefit Plans
The most common of all company pension plans, a defined benefit plan guarantees a certain level of pension income based on a pre-established formula. You'll know in advance exactly how much income you'll receive at retirement.
The formula varies among companies, but generally reflects some combination of:
- the number of years you were employed by the company
- your salary
- whether you and/or your employer were contributing to this plan
- whether CPP/QPP payments are integrated
Defined Contribution Plans
A defined contribution plan - sometimes referred to as a "money purchase plan" - defines the contributions to be made by both you and your employer, but does not define the amount of pension income you'll receive.
At retirement, you must use the accumulated value of your plan to purchase either a life annuity or, in some pension plans, a Life Income Fund (LIF).
Group RRSPs
A group RRSP is retirement savings arrangement sponsored by an employer to allow each employee to save for retirement with easy payroll deductions through their own RRSP.
Employees retain individual responsibility for choosing and managing the investments within their RRSP and for selecting a suitable retirement income option at retirement.
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Let our experts help your organization set up low-cost or no-cost Group RRSP. |
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Deferred Profit Sharing Plans (DPSPs)
Although deferred profit sharing plans are not considered formal pension plans, employers often use them to build retirement funds for their employees.
In this type of plan, an employer makes contributions on behalf of an employee. Both the employer's contributions as well as any investment income earned remain tax-sheltered until retirement.
At retirement, the employee can either transfer the employer's portion of the funds to his or her RRSP or select an eligible retirement income option.
Most DPSPs pay out at the earliest of either:
- Termination from the plan
- Termination from employment
- Retirment
- End of year individual reaches age 69
- Death
Six Key Questions to Ask about Your Company Pension Income and Benefits
- Using estimated retirement dates, how much pension income am I entitled to receive?
- Can I buy more pension credits now to increase my income during retirement?
- Is my pension indexed to keep up with the cost of living?
- What happens to my pension when I die? Are there survivor benefits? Are these survivor benefits reduced in any way?
- Will my pension income affect my government benefits? How?
- Does the company provide any other retirement benefits such as medical insurance coverage, life insurance or dental care?
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