GUEST COLUMN: Pension issues to consider

If you are a member of a pension plan, you have some important decisions to make

Achieving the retirement lifestyle you want depends on many things – your health, your plans for travelling, volunteering or even starting a new career. But among the most important is having the financial wherewithal to ensure your retirement lifestyle goals become reality.

If you are a member of a pension plan, you have some important decisions to make which will have a strong impact on the amount and length of your pension.

Decide when your pension payments will begin. If you have a defined benefit pension plan it may reduce the annual benefit if you retire before reaching a certain age or completing a minimum service requirement.

However, your plan may have a bridging benefit to offset an early retirement pension reduction that is paid from the date of early retirement up to age 65, then ceases.

Decide whether or not your pension benefit transfers to your spouse when you die. You can usually:

Elect to receive a life-only pension that ends when you die. It will deliver a higher monthly benefit to you than a joint and last survivorship pension but will not provide a continuing benefit for your spouse after you die.

Select the joint and last survivorship option. While your monthly benefit will be lower, the “joint and last survivor” option is usually better unless your spouse has his or her own pension, Registered Retirement Savings Plan or non-registered assets or adequate insurance coverage.

Decide how much the survivor benefit will be. Not all plans allow you to do this – check the details of your plan. In most jurisdictions, the standard survivor benefit is 60 per cent of the pension that was being paid to you prior to death. The higher the survivor benefit percentage, the lower the monthly benefit paid to you.

Decide to receive your pension benefit for a guaranteed minimum number of payments. Some plans allow you to choose to receive monthly pension payments over a minimum term of five, 10 or 15 years – meaning that even if you die prematurely, the benefit will be paid for the minimum period you selected.

Does your plan have a Canada Pension Plan or Old Age Security integration option? If so, you can choose to receive an advance on your pension in the form of larger monthly payments until age 65, when CPP and OAS benefits normally begin.

Do you have the option to transfer the commuted value of your pension to a locked-in account?

Instead of receiving a monthly lifetime pension, you transfer the commuted value of your pension to an account you control.

You have key pension decisions to make that will have a profound effect on your retirement. What’s right for you? Ask your professional advisor.

Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.