Deferred Pension or Commuted Value Transfer?

[Toronto.gal]

Deferred Pension or Commuted Value Transfer?

I have asked a friend to join this forum, but until then, I'll post on her behalf hoping to hear some expert opinions.

Background:

- she's working and in her 40's [planning to retire at 55/60]

- is included in the partial wind-up of prior employer's Pension Plan [pensionable service = 12 years]

- is included in the distribution of the partial wind-up surplus

- is entitled to a deferred unreduced pension of about $1400 monthly
commencing in 2027, which is the earliest unreduced retirement age [60]

My friend is inclined to go with the CV transfer, but she is not comfortable handling her own investments [yet], so would she not be better off electing a Deferred Pension instead?

Her specific question is: how to get a reasonable estimate of a commuted value? She also said that her deferred pension is not enough to hire a professional actuary.

Thanks in advance.

[MoneyGal]

She should google for consulting actuaries in whatever city she lives in.

Whoops - missed the second sentence there.

I think I am not understanding what she wants. What does she want? When you (she) say "commuted value," how does that differ for you (her) from cash transfer value? Is her pension plan administrator not providing her with the commuted value along with the cash transfer value?

[Toronto.gal]

She got the figures MoneyGal, but I guess she wants to verify the calculation.

[MoneyGal]

Hmmm. Well, who would verify the calculations if not an actuary? This is an actuarial calculation.

As a generic comment I would say that someone who does not manage their own investments should likely not take the option that requires her to do exactly that. In addition, as has just come up elsewhere in this board today, the cost of the same income stream in the open market is likely higher.

[Toronto.gal]

I agree that option 2 is too much responsibility for someone who is not a DIY investor and exactly what I told her. Moreover, she's a conservative investor as well, so a guaranteed income is definitely better.

As for determining/verifying the commuted value, I suppose an actuary will be needed then.

Thanks for the response MoneyGal.

[MoneyGal]

Here is a site to get her started: http://www.an-actual-actuary.com/

Note the list of consulting actuaries (from the links on the left-hand side). She can find a list of actuaries who do this kind of work. Good luck!