People change employment for any number of reasons; some are voluntary whilst others are forced. There are a lot of critical decisions that have to be made at times like these.
When considering what to do with an employer sponsored pension plan, or Group RRSP there are a number of things you need to determine.
Defined Benefit Pension Plan
- Find out how well funded it is. If it is a large viable company and has a small shortfall it may be fine to leave it in their hands. It is important to have a sense of how well managed the company is and their future prospects for stability and growth.
- Determine what would happen to your pension if you died. Will your spouse receive your pension until their death? Will they only receive a portion?
- Will your heirs need the money from this plan? Defined Benefit Pension Plans end at the death of the second spouse. Any leftover funds would be put back into the overall pension to be used by other pensioners, with none available to pass on to your heirs.
Defined Contribution Pension Plan
- The last two points above also apply to a Defined Contribution Pension Plan. In addition, you have to know on an ongoing basis who is managing your money, and be prepared to make changes to the plan as you move through retirement.
Group RRSPs
- Since these are the most flexible, you just need to ensure that all of the funds that your employer contributed on your behalf are yours to keep. You also will need to be prepared to choose and monitor the investments in the plan on an ongoing basis.
The first thing to do if you are changing jobs is to contact your financial advisor. For our clients, we understand that these can be some of the most important financial decisions you will ever make. They often come at an emotionally vulnerable time too. We guide our clients through the process, and provide you with all the tools you need to make informed decisions.