Your Employer is Offering you a Pension Plan. What do you Need to Know?

First and foremost, are you a member? You should be, it is never too late! There are many reasons why this is so advantageous, especially if your employer also contributes to the plan, which represents an advantage that really pays off and a great helping hand for your retirement! Not being a member of a plan to which your employer makes contributions is like turning down money given to you!

Therefore, if you are member of your workplace pension plan, it is important to verify which type of plan you contribute to. This will allow you to know what you will receive when you retire. That way, you can plan accordingly.

Here are seven things to verify:

1. What type of retirement income could you receive under your plan? Will you receive a pension under your plan? Will it instead be income withdrawn from a life income fund (LIF) or a retirement pension purchased from an insurer?
2. Which pension could you receive? With that pension and public pensions, will you have enough to replace 60% to 80% of your current income? If that is not the case, it is best to find out now, so you can start saving to make up for what is missing.
3. As of what age can you start receiving your pension? Would there be any penalties if you receive it earlier than expected?  

4. If you did not contribute to your plan during a period of absence (e.g.: during a parental leave), can you buy back that period? If so, would it be advantageous for you to do so?

   You can ask your employer for an estimate of the cost of a buy-back to help you make a decision. Generally, the longer you wait, the more expensive a buy-back becomes. Do not hesitate to consult a professional who can help you if necessary.

5. Can you end your career by working part-time? If so, can you contribute to your plan as if you were working full-time, which would allow you to receive a higher pension?
6. Will the pension you will receive be adjusted to the cost of living, that is, indexed, each year? Most pensions are indexed only in part. It is important to know because a pension that is not adjusted to the cost of living will not give you the same purchasing power over time. The more years go by, the less you will be able to buy with the same amount of money.
7. Does the pension under your plan decrease at age 65? If so, you will need to take this into account in your financial planning.

You may also have contributed to more than one pension plan during your career. If you are having trouble getting your head around it, do not hesitate to ask for advice to help you see the big picture.