# Changing jobs - pension



## Steve19 (Jun 29, 2009)

Hi everyone,

Just out of curiosity, what happens when you change employers, let's say every 5 years, all of whom offer pensions. If you keep changing jobs every 5 years and accumulate a pension from each employer, can you essentially retire in 30 years with a "full-pension" from carrying forward all of the accumulated pay out amounts?

Thanks.


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## Dana (Nov 17, 2009)

We have both worked for several employers who all offered pensions. Now we have several LIRA accounts. Federal LIRAs for the employers whose pensions fell under federal jurisdiction and Provincial LIRAs for employers whose pensions fell under provincial legislation. On the upside, if you already have a federal LIRA and you leave your current employer with a Federally regualted pension, you can combine the two LIRAs. Same rule applies to provincial plans (provided they are regulated by the same province). However you cannot combine federally and provincially regulated pension funds. So there is a lot of administrivia involved with changing employers every 5 years. 

As for retiring with 'full pension', I don't think this would be the case as you no longer benefit from employer contributions on the full amount once you terminate your employment. Your current employer is only contributing to your current pension plan with them, the commuted value you have from previous employers no longer benefits from their contributions. 

If you didn't commute your pension amount upon terminating your employment, your employer's contributions still cease. When you receive your pension paperwork, there is usually a calculation showing you how much the pension payment will be if you leave the money in the plan. You have to take that information and decide if you think you can do better by investing the commuted value on your own.


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## Saniokca (Sep 5, 2009)

Steve19 said:


> Hi everyone,
> 
> Just out of curiosity, what happens when you change employers, let's say every 5 years, all of whom offer pensions. If you keep changing jobs every 5 years and accumulate a pension from each employer, can you essentially retire in 30 years with a "full-pension" from carrying forward all of the accumulated pay out amounts?
> 
> Thanks.


This is assuming that you have a defined benefit pension plan:

You can keep your pension with the employers. When they send you a termination form. You can select "deferred to 65 option" and then all you have to do is keep track of all these benefits.


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## square one (Jan 19, 2010)

If you are able to transfer your old pension to the new pension plan each time you change jobs, you might be able to eventually accrue 30 yrs of eligibility service, though the amt of time transferred might not be exactly what you put in. Then you could potentially get all the benefits of 30 yrs of service in essentially one plan. However if you have many separate small 'deferred pensions' they might all add up to a similar amount but you wouldn't get the benefits of 30 yrs of service toward a 'full unreduced' pension at say 55. You might only get the full unreduced amount at age 60, with percentages lost if you retire before age 60. Of course each plan might be different and you would want to read the fine print, and I am referring to defined-benefit plans. And ideally you would want to end up in a safe plan i.e. government if you kept transferring all the money forward.

I am considering all of this myself as I am being laid off next month from a hospital after 14 yrs accrued service. If I can find another employer with the same pension plan within 6 months I will keep the same plan and continue on from 14 yrs. Otherwise the old plan will be closed and 'deferred' and I will start a new one, and never reach 30 yrs of eligibility service, which means less money if I retire before age 60. This decision could be very important if you want to retire early.


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## Steve19 (Jun 29, 2009)

Thanks everyone.

I found an article from the globeandmail which discusses this topic and provides calculations on different options. It is probably best for one to transfer the amount from one pension fund to the next, rather than take the commuted value and invest it on your own (unless your investment skills are adequate).

http://www.theglobeandmail.com/glob...nging-your-pension-joshs-story/article732066/

Some further questions. 

If you had a defined benefit pension plan with your old employer, and your new employer offers one as well, why then is your pension income reduced after 30 years of service (say 15 years from two employers), if you transfer employers who both offer a DBP? If I worked from age 25-40 from one employer (15 years) and worked for my new employer from age 40-55 (15 years), that would add up to 30 years of service. Why is the pension income reduced if I retired at age 55 (under 60?)

Thanks!


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## OptsyEagle (Nov 29, 2009)

I didn't read the article but one problem you have is the 1st pension is based on your highest income at that time and the second is based on the highest income over that time. With one pension, they will both be based on your highest income. It can't help but be higher.


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## Steve19 (Jun 29, 2009)

Say your income stays the same, what happens then?

So, if you work at one employer for 10 years and make 90K and then change employers, and still make 90k, and work for 20 additional years, how is your pension calculated? Keep in mind, both offer a defined benefit pension. Do you still get to retire with your "full" 30 years of unreduced payments even though you changed employers? Or do you have to wait until you reached 30 years of service with your 2nd employer (making you retire at a later age) to receive an unreduced amount?

I emailed my pension company this question, but have not heard back.

Thanks.


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## George (Apr 3, 2009)

Steve19 said:


> Say your income stays the same, what happens then?
> 
> So, if you work at one employer for 10 years and make 90K and then change employers, and still make 90k, and work for 20 additional years, how is your pension calculated? Keep in mind, both offer a defined benefit pension. Do you still get to retire with your "full" 30 years of unreduced payments even though you changed employers? Or do you have to wait until you reached 30 years of service with your 2nd employer (making you retire at a later age) to receive an unreduced amount?
> 
> ...


If you use your existing pension to buy into a new pension plan, your pension payments will be governed by the rules of the new plan, based on the years of service (combined old and new job) and income under the latter plan.

Most plans have some formula of age plus years of service for an unreduced pension. If you enter a pension plan with transferable credits from a previous plan, those credits would go toward increasing your years of service, and would appear on your pension statement as "purchased" service.

It's pretty unlikely that your income wouldn't change at all over 20 years, though.


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## smartmoney (Apr 7, 2010)

*Pension-variable annuity*

Another option is to put commuted amount into a variable annuity, sold by companies such as sunlife, manulife and my company Desjardins.
You are guaranteed a certain percentage payout based on your age for the rest of your life, no matter how long you live. Also, because the funds are invested in the market, you can increase the annuity amount so that you receive a raise during retirement. When you do pass away, the full amount is passed on to your spouse, rather than just 60% as in a pension plan.


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## jared (Apr 8, 2010)

Steve19 said:


> Say your income stays the same, what happens then?
> 
> So, if you work at one employer for 10 years and make 90K and then change employers, and still make 90k, and work for 20 additional years, how is your pension calculated? Keep in mind, both offer a defined benefit pension. Do you still get to retire with your "full" 30 years of unreduced payments even though you changed employers? Or do you have to wait until you reached 30 years of service with your 2nd employer (making you retire at a later age) to receive an unreduced amount?
> 
> ...


There's a lot of moving variables involved here. Each pension plan has its own governance structure that can be complex. However, generally speaking each pension plan will calculate the "defined benefit" similarly.

The calculation will likely factor in at your earnings history and your record of service / age. 

With a defined benefit plan, each company has essentially promised to pay you a benefit in the future. Therefore, unless the company is acquired, your new employer will not be taking on the new obligation, unless it was somehow negiotiated with your old company. But, generally speaking a company doesn't usually do that sort of thing. So, you'll have 2 defined benefit pensions.... one calculated on your years worked at Company 1, and another based on the work at Company 2. Using your $90k/year assumptions for each employer, you should technically end up with the same _total_ pension benefit... ie you'll be getting 2 pension payments, then if you'd stayed with Company 1 and for your full career.

Without knowing more specifics, its pretty much impossible to tell whether one would be lower than the other. However, just for the sake of speculation, if the way your defined benefit was calculated was by an average of your final years pay (say the last 5 years)... you're likely to have a higher pay in your last 5 years of your career than 5 years in the middle of your career. These salaries are then adjusted by your years of service... so the longer you work for the last employer (with the higher salary) the larger your pension benefit will be.

I hope that helps. I'm a pension auditor, so I know these things are complex. Your best bet is to simply ask your pension administrator, which you've already done.


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