# Transferring pension to RRSP?



## MasterCard (Aug 2, 2013)

My company offers matching on contributions to a DC pension. 
I am wondering - can I transfer the contributions from my pension to an RRSP and then withdraw under the home-buyer's plan?

Is this something I should ask Standard Life?
Would the company take away their contributions?

Not sure where to start :/


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## Butters (Apr 20, 2012)

My company matched 50%
I was able to take out the whole 22k and close the account, because it was not locked in (it also wasn't a RRSP)
It was through manulife, I called them and asked... So you should call your investment company and ask

I am fairly certain the company would not take away their contributions!


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## Plugging Along (Jan 3, 2011)

I think you will need to find out the specific details. My last company had a DC pension! and I could transfer it to locked in account only. I was only allowed to,do it when I left the company. 

My spouse has a group rrsp, and was able transfer into an rrsp. I believe they are two different plans with different rules.


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## alingva (Aug 17, 2013)

Are you sure you had DC? I believe you had DB which was transferred to LIRA (locked in). 
(A little bit off topic):
DC is much much MUCH better than DB. DB is a promise to pay you cash flow at certain point in life. Since it is a promise you might never receive it. DB is paid monthly (or bi-weekly, does not matter), you cannot take lump sum and usually it is not adj to inflation (or very little). My recommendation is to transfer DB (or DC) to RSP (locked in or a personal). I do not believe in future promises especially when demographics is not on my side.

You should ask SL if they allow to withdraw your RRSP for 1St THBP, usually they do


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## Eclectic12 (Oct 20, 2010)

alingva said:


> DC is much much MUCH better than DB. DB is a promise to pay you cash flow at certain point in life.
> 
> Since it is a promise you might never receive it. DB is paid monthly (or bi-weekly, does not matter), you cannot take lump sum and usually it is not adj to inflation (or very little). My recommendation is to transfer DB (or DC) to RSP (locked in or a personal). I do not believe in future promises especially when demographics is not on my side ...


At the end of the day - how many DB's will pay nothing versus how many people are making bad choices in the DC, where they will end up far short of what they need?

Most DC plans I've been offered have a limited range of MF's with MERs around 2%. 

Then too - when offered the chance to transfer from a DB to a DC, checking the details revealed that the contributions to the DB were just under 6% whereas the contributions to the DC were 2%. That would have meant having to make up at least 1.5% that the employer was no longer contributing.


Finally - suggesting a transfer of a DB to a DC (or RRSP) could be moot as the DB plans want economy of scale so most are required to join & stay in the plan. The two situations I am aware of where a transfer is possible are when one has quit the company and if the employer is closing down the DB pension.


Cheers


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## Plugging Along (Jan 3, 2011)

alingva said:


> Are you sure you had DC? I believe you had DB which was transferred to LIRA (locked in).
> (A little bit off topic):
> DC is much much MUCH better than DB. DB is a promise to pay you cash flow at certain point in life. Since it is a promise you might never receive it. DB is paid monthly (or bi-weekly, does not matter), you cannot take lump sum and usually it is not adj to inflation (or very little). My recommendation is to transfer DB (or DC) to RSP (locked in or a personal). I do not believe in future promises especially when demographics is not on my side.
> 
> You should ask SL if they allow to withdraw your RRSP for 1St THBP, usually they do



Yes, I am 100% sure it was DC. There was also a DB option which I did not take. I have now found out that that company is switching over to DC, but I am no longer there

DB vs DC is a matter of plans. I am now in a Db, it does not give you a choice unless you leave the corporation. I don't think I will stay long enough to get the full benefits, but there is no choice to opt out, which I am fine with because of the corporations contribution which I would not otherwise get.


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## MasterCard (Aug 2, 2013)

Called Standard Life, they said after 2 years the pension becomes locked-in and therefore you can't withdraw till retirement.
Was considering transferring it to my RRSP, and then withdrawing via HBP - I essentially almost double my money, but guess not.
Thanks folks!


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## alingva (Aug 17, 2013)

Eclectic12 said:


> At the end of the day - how many DB's will pay nothing versus how many people are making bad choices in the DC, where they will end up far short of what they need?


 At least I have an option to lose MY money myself and not to rely on PROMISE of someone


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## alingva (Aug 17, 2013)

MasterCard said:


> can't withdraw till retirement.


Depends on Locked in legislation (province the plan was opened), in many cases it can be 55 y.o.


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## sags (May 15, 2010)

I am puzzled why so many people want to change their DB pension plans to DC plans.

With a DB pension plan, the only risk to the retiree is the remote possibility their benefits could be reduced.

With a DC pension plan, the risk is the capital could be decimated, as what happened during the Great Recession.

With a DB pension plan, the retirement income stream is already determined.

With a DB pension plan, the capital has to be converted to an income stream.

It seems that some with DB pension plans are wishing for DC plans to have the capital........while others with capital are searching for retirement income similar to a DB pension plan.

Is it the "other side of the fence is greener" theory in action?


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## sprocket1200 (Aug 21, 2009)

A DB has too many restrictions.

DC worked for us. Retired at 41, we are savers though.

My neighbour who is 37 MUST.work another 18 years to get at his DB. Then he has the pleasure of paying for my full govt benefits with his taxable income. It's a trap...



sags said:


> I am puzzled why so many people want to change their DB pension plans to DC plans.
> 
> With a DB pension plan, the only risk to the retiree is the remote possibility their benefits could be reduced.
> 
> ...


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## Spudd (Oct 11, 2011)

I doubt he MUST work another 18 years to get his DB. He probably would get a reduced DB if he retired early (but couldn't collect it until he is the right age, of course). I think the problem is that a lot of people just depend on their DB and spend all their other money, so they really need to wait for the right age before they retire. Personally I have a DB (we had the option to change to DC back in 2000 but I declined), and if I retired today (age 41, 15 years of service), I'd get around 18k/year once I'm 60 or I could take a reduced pension anywhere between age 55 and 60. The longer I work, the more my pension will pay per year (it's a formula of years of service * a percentage * best average 3 years salary).


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## Eclectic12 (Oct 20, 2010)

alingva said:


> At least I have an option to lose MY money myself and not to rely on PROMISE of someone


True ... just bear in mind that with the interest & time the average person spends on finances/investing - their results are likely to tend to be worse than a DB pension. Assuming that the contracted for DC plan offers a reasonable choice of investments at a semi-reasonable cost. 

With fewer DB pensions available - it's going to far more important for people to understand investing and have decided on what they are going to do.


Cheers


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## Eclectic12 (Oct 20, 2010)

sprocket1200 said:


> A DB has too many restrictions.
> 
> DC worked for us. ...


It would seem YMMV, where the DC plan contracted for likely plays a key part in how it is evaluated.

One I was offered was cutting Employer contributions by something over 2% for the privilege of investing in four MFs. I couldn't see how that was going to grow better than the DB investments.


Cheers


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## alingva (Aug 17, 2013)

sags said:


> I am puzzled why so many people want to change their DB pension plans to DC plans.


DB is a promise. Nothing else. I wish you good luck receiving your portion when more and more retirees retire and less and less people support them (your current contribution is someone's pension). Detroit teaches people absolutely nothing...One day it was the richest city in North America.


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## Maybe Later (Feb 19, 2011)

There's a lot of misinformation and misunderstanding about both DB and DC plans. FWIW, the management fees in my DC plan average to about 0.3%. Just like everything, there are probably both good and not-so-good plans out there. I only point this out so that we don't get in the habit of painting everything with the same brush. The details matter.


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## alingva (Aug 17, 2013)

Details matter as long as the plan has promised money.

Read
Detroit Pensioners Face Miserable 16 Cent On The Dollar Recovery
http://www.zerohedge.com/news/2013-10-27/detroit-pensioners-face-miserable-16-cent-dollar-recovery


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## alingva (Aug 17, 2013)

Sad stats about what is promised (and what will be delivered)
http://www.moneyinside.ca/blog/finance/disturbing_statistics_about_retirement_b-11.html


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## Eclectic12 (Oct 20, 2010)

Maybe Later said:


> There's a lot of misinformation and misunderstanding about both DB and DC plans.
> 
> FWIW, the management fees in my DC plan average to about 0.3%.


 +1 ... where on the other end of the spectrum, the DB to DB transfer I was offered was going to cut the combined Employee/Employer contributions by a bit over 4%. The DC plan itself had four MFs, with a MER of 2.1% at the cheap end.

Just as with the DB pension, there's quite a range out there.


Cheers


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## Eclectic12 (Oct 20, 2010)

Re: - Detroit Pensioners

The question is how comparable is this?

My understanding is that the legislation is different and allows widely different actions. For example, I don't believe Canada allows companies to borrow money already in the pension to pay for company operations & executive compensation. The US does and this action has been documented as the most of the reason several DB pensions went from being fully funded to being bankrupt.


Cheers


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## alingva (Aug 17, 2013)

DB payout is based on future contributions of its members and not on its investments. If I tell you there is 25% chance you lose your pension in 20 years but you pay 0.5% for your investment and 0% chance you lose your mutual fund (meaning nobody takes it from you) but you pay 2% in fees - what would you take? You WILL lose your pension one way or another, it is a matter of time. DB is based on how many people enroll into it and demographics is not on your side. Unless we allow all Africa and Middle East immigrate to Canada


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## Eclectic12 (Oct 20, 2010)

alingva said:


> DB payout is based on future contributions of its members and not on its investments.


Odd ... the company I worked for stopped contributing to the DB pension plan for about eight years *because* the pension investments had grown to the point the pension actuary said there were too many investments compared to the current/future liabilities.

More recently - based on the 2008 drop investments, the company recently added an extra $2 million to the pension fund to be invested.


Both actions indicate that the invested contributions and how those investments are performing are an important factor to what can be paid out.





alingva said:


> If I tell you there is 25% chance you lose your pension in 20 years but you pay 0.5% for your investment and 0% chance you lose your mutual fund (meaning nobody takes it from you) but you pay 2% in fees - what would you take?


As it stands now, the only voluntary way for me to quit my DB pension is to quit my job - so there is no option of what to "take".

IAC, if it really is "number of employees" - there should have been no need for the company to add money to the pension fund as there are more employees now than there were five or ten years ago.


Cheers


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## alingva (Aug 17, 2013)

Eclectic12 said:


> IAC, if it really is "number of employees" - there should have been no need for the company to add money to the pension fund as there are more employees now than there were five or ten years ago.
> 
> 
> Cheers


By more employees I mean more contributors rather than more receivers.
If your plan is doing very well- 
1.it is very good 
2.will it be better in 10y? will it have money in 10y to pay you? will investments grow 8%-10% per year as the management projects?
3.I know several people who left their job to switch their DB to Locked in RRSP and were rehired by the same company again. The purpose was to get their money (DB) to their RRSP
4.When you get monthly payment from your pension - will it be adjusted to inflation if it is 20% or 30% or 200%? I do not know what inflation will be in the future but it will be high to get rid of all the debt in the system. Nobody will pay you pension adjusted to inflation (to the real one, not CPI).


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## Eclectic12 (Oct 20, 2010)

alingva said:


> By more employees I mean more contributors rather than more receivers.


 .... the number of full time employees is increasing so this likely means there are more contributing than receiving. 





alingva said:


> .. If your plan is doing very well-
> 1.it is very good
> 2.will it be better in 10y? will it have money in 10y to pay you? will investments grow 8%-10% per year as the management projects? ...


Based on the company topping up the shortfall, adjusting the employee contributions to higher levels and adjusting the structure - it would appear likely there will be money there.
Some of those who have been around thirty years have commented that the plan goes in cycles - when investments are doing well, the benefits/contributions are adjusted and when as now, there are challenges, the plan is adjusted.




alingva said:


> 3.I know several people who left their job to switch their DB to Locked in RRSP and were rehired by the same company again. The purpose was to get their money (DB) to their RRSP ...


Are you sure they were re-hired as full time employees?

Companies that offer DB plans usually want to manage their risk. One way to do this is to achieve an economy of scale by having all full time employees, including the executives, in the DB plan. The employees who have left and then come back have had to re-join the DB plan. The exception was a consultant or two - though there was lots of pressure put on the consultant to become a full time employee and re-join the DB pension plan.




alingva said:


> 4.When you get monthly payment from your pension - will it be adjusted to inflation if it is 20% or 30% or 200%?
> ... Nobody will pay you pension adjusted to inflation (to the real one, not CPI).


 ... which is why the DB pension is only one part of my retirement plan.


Cheers


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## nobleea (Oct 11, 2013)

Reverse question here. My wife will be on maternity leave next year. She has a DB through the public school board. When she returns, there is the option of buying back the year of service that was not worked (it's actually something like 35 weeks of service). Costs about $7-8K given her age and years of service. This can be done by transferring money from an existing RRSP. This would mean the difference between retiring at 55 vs 56 with full pension. I think it's a wash in terms of money. For example, keeping the 8K in an RRSP and getting ~7.5% return for 30 years would be roughly the same as the pension income from 55 to 56.

Buy back the service? Or keep it in the RRSP? In the event of a pension break down or leaving to another employer, we get all the contributions back, so that's not a risk.


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## Eclectic12 (Oct 20, 2010)

nobleea said:


> ... Buy back the service? Or keep it in the RRSP?
> In the event of a pension break down or leaving to another employer, we get all the contributions back, so that's not a risk.


My understanding is that the province would back the DB pension. So rather than a pension break down, I'd be more concerned about the province changing the benefits in the future, boosting the employee contributions and possibly boosting the retirement age.

If it comes out as a wash today - I'd stick with the RRSP as the longer the province is scrambling for money, the more I'd suspect that RRSP will come out ahead and as I understand it, then your most likely risk is bad investment decisions or the less likely situation of a creditor trying to seize it.


Cheers


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## nobleea (Oct 11, 2013)

Eclectic12 said:


> My understanding is that the province would back the DB pension. So rather than a pension break down, I'd be more concerned about the province changing the benefits in the future, boosting the employee contributions and possibly boosting the retirement age.
> 
> If it comes out as a wash today - I'd stick with the RRSP as the longer the province is scrambling for money, the more I'd suspect that RRSP will come out ahead and as I understand it, then your most likely risk is bad investment decisions or the less likely situation of a creditor trying to seize it.


They could certainly change the retirement age. The current magic number is 85 (age+years of service). I believe it used to be 100. If we transfer it to the pension, then all things being equal, she can retire a year early. From what I understand, the early retirement options are brutal, so you pretty much have to hit that magic number.

My hope/goal is that we can seriously consider retirement or partial retirement before 50. So if that's the case, we'd have to assume that the pension will not be available, and it will just be a massively reduced lump sum payout. Depends on whether I can convince her to keep working for 10 years while I'm retired!


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## chantl01 (Mar 17, 2011)

Eclectic12 said:


> Odd ... the company I worked for stopped contributing to the DB pension plan for about eight years *because* the pension investments had grown to the point the pension actuary said there were too many investments compared to the current/future liabilities.
> 
> More recently - based on the 2008 drop investments, the company recently added an extra $2 million to the pension fund to be invested.
> 
> Both actions indicate that the invested contributions and how those investments are performing are an important factor to what can be paid out.



Interesting discussion. One case that I don't think most people outside the affected groups are aware of is what happened to the federal pension plan surplus back in the 1990s. The DB pension plan had grown so large that it was actuarially assessed as having a $28 billion surplus, which the federal government then used to pay down the deficit. The unions and professional organizations tried to fight the federal government in the courts to have the surplus restored, but were ultimately unsuccessful:
http://www.cbc.ca/news/politics/top...not-entitled-to-28b-pension-surplus-1.1292628

And of course this year the federal government has put in place legislation to have the members of those same organizations pay a greater percentage of the contribution into their DB pension plan to "ensure it is financially sustainable over the long term." 
http://www.tbs-sct.gc.ca/media/nr-cp/2013/0101-eng.asp

Note that this is not a complaint by a contributor, just a comment that DB plans can end up in either very good or very bad financial shape depending on the investments made with their contributions and that the employer has a lot of leeway on how those investments are used, so long as they can meet their obligations under the law.


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## Eclectic12 (Oct 20, 2010)

chantl01 said:


> Interesting discussion ...
> 
> Note that this is not a complaint by a contributor, just a comment that DB plans can end up in either very good or very bad financial shape depending on the investments made with their contributions and that the employer has a lot of leeway on how those investments are used, so long as they can meet their obligations under the law.


The question is whether the ability to dip into the surplus is available to all or was it the gov't (like some provincial gov'ts) ignoring their own legislation.

I seem to recall a G&M article about the surplus in the Ontario teachers fund pointing out that alleged deficit was the provincial gov't borrowing money to buy Suncor shares and that if the gov't were following the legislation they expect private companies to follow, this wouldn't be allowed.


Cheers


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