# CPP + Sun Life Work Pensions



## ML91 (Dec 5, 2015)

Hey, 

Once I am able to retire, does my CPP + Work pension collect interest/ rise with inflation? For example if I put in 2500 CAD this calendar year, will that be 2500 cad in 2046 or will it be much higher? Sorry if this is a dumb question but I haven't been able to find an answer to this question online and am unfamiliar with pensions..


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## Spudd (Oct 11, 2011)

Your CPP will rise with inflation for sure. 

For the work pension, some pensions are indexed to inflation, some are partially indexed, and some are not indexed. You would need to check with your HR department to find out. (I'm assuming it's a DB pension.)


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## Eclectic12 (Oct 20, 2010)

If it is a DC pension, whatever the investments make is what one has. 
If it beats or lags inflation, it is all that one has.


Cheers

*PS*
It sounds like Sun Life is just getting into the DB pension business, from this 2014 article.
http://business.financialpost.com/n...-pension-funds-access-to-private-market-deals

Their web site touts they are "the largest defined contribution plan provider in Canada".


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## ML91 (Dec 5, 2015)

Yup its a defined contribution pension plan - so not really a standard "pension" plan? What is the general consensus on this type of pension?


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## Eclectic12 (Oct 20, 2010)

Any pension is a "standard" pension ... just like any mortgage is a "standard" mortgage that has to adhere to the laws in force.

Both vary in the details, how it works and what features it has - the difference with the pension is typically one has whatever the employer has contracted for whereas for the mortgage, one can compare features/interest rates and go with what fits one's needs or change providers if there is a better offer at renewal time.


As for "What is the general consensus on this type of pension?" ... I don't think a consensus exists.

Those that don't have access to one so that only their own money goes into retirement savings (ex. TFSA & RRSP), typically would prefer one as usually the employer is putting money into this type of pension as well as the employee. Those with a fully funded DB pension don't like a DC pension as the employee is shouldering the risks of bad investment choices as well as running out of money. Those who had their company bankrupted so that the payout is not what was originally promised would have preferred a DC pension. Those who don't understand a DB pension but see their RRSP contribution room earned being slashed by the DB pension don't like it (some run the numbers then change their mind where others don't).

Except for specific circumstances (ex. changing jobs, employer offering to allow a conversion from DB to DC, asking employees on how benefits can be improved) ... it is better IMO to get a basic understanding of the types and dive into the details of the pension one has. Time understanding a DB pension that one does not have access to is better spent understanding the requirements of the DC pension one has, what investment choices there are, what costs each choice has and how to fit the DC pension in with one's overall plan.

Example ... low 1% employer + 1% employee contributions that can only be put into four MFs (one money market, one Canadian equity, one US equity and one bond) where all but the MM fund has a 2.6% MER likely means one should be setting up their own self-directed RRSP (SD-RRSP0 to counter balance the limited choices available. Checking the rules plus asking questions may reveal that after a one year holding period, some/all of the contributions can be transferred to one's SD-RRSP where the limitations/costs are removed. Other plans don't allow a transfer.


Returning to the original question with the added info that this is a DC pension ... if you want to know if the contributions will keep up with inflation then look at what the money is being invested in. For a while now, if it is a MM MF or GICs at say 1% ... it is likely falling behind inflation. 

Where one is not happy with what it is is ... what are the other choices? 

What are the steps to move it to another choice?

Where the choices are limited or dismal ... can a SD-RRSP help balance it out? For example, allocate most of the DC pension to low fee GICs/fixed income and use the SD-RRSP for the equity, precious medals but not the GIC/fixed income.


Cheers


*PS*

If you post the details of the funds as well as what sort of mix you are thinking about, people are generally good about commenting on how good/bad or alternatives to think about.


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## Spudd (Oct 11, 2011)

Since it's a DC pension, you will basically get a lump of money when you retire, that you can draw on at whatever rate you see fit. It doesn't really make sense to ask if the payments will increase with inflation, because it will all depend on how much you decide to take out. 

The balance between now and then will rise or fall depending on what you invest it in, as Eclectic explained above.


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## nobleea (Oct 11, 2013)

Spudd said:


> Since it's a DC pension, you will basically get a lump of money when you retire, that you can draw on at whatever rate you see fit. It doesn't really make sense to ask if the payments will increase with inflation, because it will all depend on how much you decide to take out.
> 
> The balance between now and then will rise or fall depending on what you invest it in, as Eclectic explained above.


I wish the industry would stop calling it a DC pension. It's an RRSP. That's it.


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## sags (May 15, 2010)

You are right. The word "pension" makes it feel all nice and homey............a safe and an assured income stream in retirement, usually accompanied by pictures of older folks enjoying life.

In most cases "DC pensions" are RRSP's with restricted investment choices. Likely the OP had to choose from several mutual funds administered by Sun Life, with high management fees.

It is what it is. Take the "free" employer contribution, make some choices of mutual funds and hope for the best. Just don't count on it and add to your own TFSA every year.


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## Eclectic12 (Oct 20, 2010)

nobleea said:


> I wish the industry would stop calling it a DC pension. It's an RRSP. That's it.


Is it?

Try withdrawing everything from a DC pension at say age 35 from a DC pension and an RRSP. As I understand it, only in a few circumstances will the DC pension cleanout be allowed whether one is working for that company or not. 

The RRSP cleanout is always allowed (though it may not be the smart move tax wise).


Cheers


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## Eclectic12 (Oct 20, 2010)

sags said:


> ... In most cases "DC pensions" are RRSP's with restricted investment choices.


RRSPs that with a few exceptions, one can't withdraw from it ... withdrawal restrictions the RRSP does not have.




sags said:


> ... Take the "free" employer contribution, make some choices of mutual funds and hope for the best. Just don't count on it and add to your own TFSA every year.


Count on it as much as one would count on the fluctuating value of an RRSP or TFSA.


I can understand the envy compared to a DB pension and possibly how limited the choices are but I don't understand the negativity about free money or that it forces the employee to save (which a lot of people don't do in their RRSP).


Cheers


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## RBull (Jan 20, 2013)

Sags, Perhaps you mean don't count on it alone, and to do your own investing as well. Otherwise the OP can count on it to the extent the funds accumulate. 

There is likely some restrictions on withdrawals until age 55 and on converting to a LIRA or RRIF first.

i would also do more than just hope for the best. Make good choices for investments of what is available, monitor it and take advantage if you are able to move some of it periodically to your own RRSP if the costs are high. Also be proactive about learning as much as you can about the plan and investing for yourself. 

edit eclectic12 beat me to the answer


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## Eclectic12 (Oct 20, 2010)

DB pension I was/am in or the DC pension I was offered ... both barred withdrawals before a minimum age (typically 55 to 60).

From what I understand or have done ... the RRSP and TFSA do not have any restrictions limiting withdrawals.


Cheers

*PS*

Bottom line it is part of the retirement picture ... and as limiting as a DC pension might be - there are those trying to save using only an RRSP who would love the idea of having an employer add $$$ to the retirement savings.


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## nobleea (Oct 11, 2013)

Eclectic12 said:


> DB pension I was/am in or the DC pension I was offered ... both barred withdrawals before a minimum age (typically 55 to 60).
> 
> From what I understand or have done ... the RRSP and TFSA do not have any restrictions limiting withdrawals.
> 
> ...


Weird. In our 'DC' plan, we can certainly withdraw all our funds at any time. After a certain time with the company (2 or 3 years). I believe the company suspends matching contribution for something like 5 yrs if you do it, but there's no restrictions on getting at your money. 
Subject to witholding taxes of course.


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## Eclectic12 (Oct 20, 2010)

It may be a provincial thing ... Manitoba says anything that isn't locked in is fine for a withdrawal but for the locked in part, the two choices are leave it with the company DC plan or transfer to a LIRA.

From what I understand, the company is able to expense their DB or DC contributions but not RRSP matching funds ... so I would expect the employer contributions at minimum to be locked in. One DB pension that I transferred out of had a small amount that could be taken as cash, a bigger amount that had to go into a LIRA and a similar amount that had to go into my RRSP (where a withdrawal would be income). The second DB pension that I left was LIRA and RRSP.


Of course it is a moving target as pension laws are changed ... for example, Ontario changed their pension laws to drop the two year vesting period so that pensions now vest the day the employee starts.


Bottom line is that while there are a lot of similarities and it may be useful to think of the DC pension as an "RRSP", there may be limits that change the landscape dramatically.


Cheers


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## nobleea (Oct 11, 2013)

My qualm has more to do with the fact that it is nothing like a pension. There are no guaranteed amounts, the payouts are not related to your years of service and highest grossing years. It's not integrated with CPP, etc.

Using the words DC pension just makes it shinier than it really is. It's an RRSP, subject to the whims of the market and weaknesses of an individual investor's poor decisions.


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## Eclectic12 (Oct 20, 2010)

The provinces make it a jungle out there ...

Alberta in 2014 apparently canned the ability of a vested / locked-in member from suspending membership and transfer their accounts to a locked-in retirement account if permitted under the DCPP has been eliminated. OTOH, the joining the DCPP date determining whether the DCPP member can be forced to transfer the assets out was removed.

The requirement that a DCPP must now provide for the right of a member with a shortened life to withdraw all or a portion of the funds seems to be added.
http://www.sunlife.ca/Canada/GRS ma...slation effective September 1?vgnLocale=en_CA

Nova Scotia in 2015 maintained the rule that a non-resident can't use their residency status to unlock the pension. They also seem to have confirmed that a shortened life span as a criteria to unlock is at the plan's discretion.
http://www.sunlife.ca/Canada/GRS ma... Benefits Act and Regulations?vgnLocale=en_CA


Cheers


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## Eclectic12 (Oct 20, 2010)

nobleea said:


> ... Using the words DC pension just makes it shinier than it really is. It's an RRSP, subject to the whims of the market and weaknesses of an individual investor's poor decisions.


So what wording would you suggest?

Calling it an RRSP when one can at best withdraw something like 40% of the funds where the RRSP can have 100% of the funds withdrawn is misleading as well.


That said ... DB, DC, RRSP with employer matching - not many take the time to try to understand it.


Cheers


*PS*

The more I think about it ... "pension" seems to be more of an indicator of what legislation one is under. If it is the TFSA or RRSP, then it is the Feds. Pension mostly means the provinces/territories - though the Feds are still a possibility.


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## Daniel A. (Mar 20, 2011)

A good book worth reading is pensionize your nest egg for anyone wanting to understand the pro's and con's of different pensions.


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## naysmitj (Sep 16, 2014)

This book is available free at 
http://www.naylornetwork.com/gos-nwl/pdf/SolutionsWinter2011.pdf


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## nobleea (Oct 11, 2013)

Eclectic12 said:


> So what wording would you suggest?
> 
> Calling it an RRSP when one can at best withdraw something like 40% of the funds where the RRSP can have 100% of the funds withdrawn is misleading as well.
> 
> ...


Withdrawing/having access to the RRSP funds prior to retirement is not the main point of an RRSP, so it doesn't matter that some places restrict how much you can withdraw.
At tax time, does it show up as an RRSP contribution or a pension adjustment? In our program it was an RRSP contribution for 90% of the time. The other 10% is the couple years they tried a DPSP and it showed up as a PA on our tax forms.


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## Eclectic12 (Oct 20, 2010)

nobleea said:


> Withdrawing/having access to the RRSP funds prior to retirement is not the main point of an RRSP, so it doesn't matter that some places restrict how much you can withdraw.


It is a major difference, n'est pas?




nobleea said:


> At tax time, does it show up as an RRSP contribution or a pension adjustment?


The people I've talked to who were in DC pensions said their PA was $1 for $1 (i.e. $1 employee contribution meant a $1 PA versus the DB pension types where $1 employee contribution meant a much larger PA of $5 or more.


This 2013 article says ...


> If your client participates in a company-sponsored registered pension plan (RPP) or deferred profit-sharing plan (DPSP), he or she will have a pension adjustment (PA) entered in box 52 of the T4 slip ...
> 
> *For those enrolled in a defined-contribution or deferred profit-sharing plan, the PA is *simply the total amount contributed for the year.


http://www.advisor.ca/retirement/retirement-news/area-52-know-your-pension-adjustments-45085

This lines up with what I learned about DB and DC pensions almost thirty years ago.

Other sources say the same thing.
http://www.milliondollarjourney.com/what-is-the-pension-adjustment-pa.htm
http://blog.taxresource.ca/calculating-the-pension-adjustment/
http://www.taxtips.ca/rrsp/rrspcontributionlimits.htm




nobleea said:


> In our program it was an RRSP contribution for 90% of the time. The other 10% is the couple years they tried a DPSP and it showed up as a PA on our tax forms.


If your program only had a PA while there was a DPSP, according the information I have ... this is likely an RRSP with possibly employer matching - not a DC pension.

[ If it is an RRSP ... it would explain the differences from a DC pension as well as why you are not seeing any difference. ]

Cheers


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## latebuyer (Nov 15, 2015)

Just a note that i wouldn't assume the fees for the mutual funds in sun life are bad. The fees in my group rrsp plan are quite good. For example, the us index fund is .2% which considering there is no trading fees is good. The problem is i don't think they'd be easy to transfer out without selling.


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## Eclectic12 (Oct 20, 2010)

It is a good point as over time, there seems to be more offerings with a MER that is a lot less than the old days of 3% or so.

Out of curiosity ... are all the Group RRSP funds at this good rate or are most at say 2% with a few at the better MER?


Cheers


*PS*

My company offered Group RRSP fits the "low MER funds can be found but have to be searched for" variety. The DC pension what was mistakenly offered had only the MM fund at less than 2.6% MER.


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## Emjay85 (Nov 9, 2014)

latebuyer said:


> Just a note that i wouldn't assume the fees for the mutual funds in sun life are bad. The fees in my group rrsp plan are quite good. For example, the us index fund is .2% which considering there is no trading fees is good. The problem is i don't think they'd be easy to transfer out without selling.


I have a DC plan through sunlife through my company and the fees are just as you say, around the .18-.3% range depending on what you buy. The fund choices are pretty limited, but for the most part the funds hold the majority of what most people would be looking for.


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