Defined Contribution Plan - tax implications at retirement age

[OhGreatGuru]

IMHO I would not transfer the DB it offers a set payout, the employer assumes all the risk and even if under funded today is still safer.

.....

Only if the employer remains solvent. If it goes bankrupt the pensioners are held out to dry. Just ask Nortel pensioners.

[Daniel A.]

Nortel is one of only a handful out of hundreds of plans even in the case of Nortel pensioners they still come out with 60-70 % at the end.
The funding status is far more important a factor than if the company goes bankrupt.

Whatever money is in the plan is protected.

[Eclectic12]

...You do enjoy lower management fee's than an RRSP, the down side is your limited in terms of not having a say as to which company manages the funds and can only go into a basket with normally 5-7 choices of mutual funds, no stock picking.

YMMV dramatically so without the details of the DC, I'd stick to "may enjoy lower management fees".


For example, the DC plan I had the option to transfer to had a whopping four choices for MFs, all limited to Canada/US (i.e. equity, bonds, money market and balanced). The MERs charged by the funds ranged from 2.8% to 4.0%, which at the time was the upper range of the local bank's MFs.


At the same time, the company funds contributed were dropping by 1.5% compared to the DB plan.


What the company contracts for and what the DC administrator provides can have a major impact.

Cheers

[Saniokca]

Is the pension formula that you get in the DBPP tied to your salary? If so, you should ask HR if the salary that is used in the formula will be frozen at the level that it will be in 3 years (when the freeze happens). If it isn't, your benefit will grow (assuming your salary does) even you don't earn future service in the plan). Also, does your plan provide generous early retirement subsidies? This could mean that the reduction for taking early retirement is small (compared to actuarial reductions), does the pension plan provide a bridge benefit (temporary pension from early retirement to age 65) - as you aren't retirement eligible these might not be reflected in your lump sum value today.
I would just email/call HR and ask them all these questions before making the selection. Email might be better since they can just forward it to the actuary.

Also, if you convert now you will take the tax hit today. If you don't, you will be taxed when you take the pension on your income at that time (which will probably be at a lower rate - depending how rich you are)...