# Questions about DB pension



## gibor365 (Apr 1, 2011)

My wife has DB , but all documents and calculations we received about pension income, state only if she reaches age 55 (and she can get pension only with manager permission). But what if she quit company earlier? She wouldn't be allowed to get pension , so all money will be transfered into LIRA? 
The company manages all DB , so she has no idea how much she already has on this account.... can we get estimate value of DB bases on annual pension adjustment amount?


----------



## birdman (Feb 12, 2013)

I doubt if you can estimate the value on the annual PA and normally you have to go to the company or trustees of the pension fund to get the answers to you first question. When I quit my employment with one of the big banks (yrs ago) at the age of 37 all I received were my contributions plus interest at 3%. Did not receive the employers contributions however I believe legislation on this subject changed many years ago. Both my children have left jobs over the past number of years and in one case his pension (not a DB) was simply transferred to a LIRA. Another time, one of my children had a DB plan and he simply asked what the number would be if he left and that was the amount he received. Before I retired I had a DB plan and annually we would receive a statement outlined how much we would receive at age 65, 60, 55 and what would happen if we left now.
In conclusion and as mentioned in my first sentence, and am pretty sure you will have to make an inquiry to the managers of the pension fund.


----------



## Daniel A. (Mar 20, 2011)

If you quit before age 55 you have options on where the money goes, transfer to RRSP locked in, leave the money where it is, have a new employer take it on ( very rare ) or LIRA.

Taking a pension before normal retirement age is usually with permission I think they almost always say that.


----------



## Spudd (Oct 11, 2011)

I recently quit my job with a DB pension. I have the option to take a commuted value, or I can just wait until I'm 55/60 (early retirement/normal retirement age according to this pension) and start taking the pension at that time. I would imagine this is the standard procedure.


----------



## Eclectic12 (Oct 20, 2010)

I've done this twice ... when one leaves the company, assuming the pension is vested (used to be two years but now Ontario vests immediately) then choices have to be made. 

The first pension I left was the most complicated as it had collected more employee/employer contributions than was needed to pay the small benefit earned.

The choices were:

a) keep the pension, where the benefit is no longer growing. When the pension is started, the benefit will be paid as per the formula and any adjustments made to the plan. The key here is that the only way the income can grow is by indexing. The "best five years of the last seven" is going to be fixed for the person who has left the plan versus someone still working who has a growing salary.

If she chooses this one, she will get the pension whenever the requirements are met plus she has requested it be started. For example, the pension I left had a minimum age of 55, where starting it before before 62 meant the payout would be reduced by a set amount per year. Waiting until age 62 meant the full benefit earned would be paid. 


b) transfer the pension to a new employer's pension plan, if the new pension allowed this. 

This was a non-starter for me as the new company pension did not accept transfer. If this is possible, the advantage is that previous work experience will provide credit towards a higher payout from the new pension plan. This should be carefully evaluated as transferring from a fully indexed pension with a generous benefits and/or ability to retire early to one that does not pay as well, is not indexed at all and has an older age for retirement for full benefit is probably not a good idea. If the two pensions are basically the same, it might be easier to deal with one pension.


c) leave the pension plan. Choosing to leave the pension plan meant that a set amount had to be transferred to a LIRA, a set amount had to be transferred to an RRSP and a set amount (the extra contributions) could be taken as income and taxed or transferred to an RRSP.

If the pension had been indexed, I would have left it with the company. It was not and I had decades to go to retirement so I preferred option c, with the optional amount rolled into my SD-RRSP. I was lucky in that the year before I left, the legislation was changed so that as part of c), I also received RRSP contribution room back as a pension adjustment reverals (PAR). My co-worker who left the year before also chose c) but did not get any RRSP contribution room back.


I believe it would be difficult to estimate the commuted value based on the pension adjustment (PA) as it is tied to the benefit paid, not the value in the pension. If the info is available, it might be easier to use the employer + employee contributions + an assumption about growth. Usually the plan actuary figures this out so that when the letter outlines the choices, there is a dollar amount for the total as well as sub-categories (ex. LIRA, RRSP & optional amount).

http://www.getsmarteraboutmoney.ca/...sion-plan-before-retirement.aspx#.VRGgXeEgosQ


Cheers


*PS*

At the end of the day, it is under her control as to whether she keeps the pension or takes the proceeds. Where the proceeds are taken, a chunk will have to go into a LIRA but not necessarily all.

Then too, YMMV where I've listed the most complicated one I've dealt with. When I left the second pension, the contributions were what was needed for the benefit so c) was strictly LIRA + RRSP + PAR adding to available RRSP contribution room - there was no "take as income or transfer to RRSP" for that one.


----------



## gibor365 (Apr 1, 2011)

> If the pension had been indexed, I would have left it with the company.


 it's equity based DB, her bank invest ny itself into equities, bonds etc and publishes result every year


----------



## Eclectic12 (Oct 20, 2010)

A DB pension pays out based on what's in the pension agreement ... what the pension investment portfolio is invested in has nothing to do with whether the pension paid is indexed. All the DB pensions I have participated in have invested in equities where some had zero indexing and some have a partial indexing of the pension to be paid.


To use an analogue, this is like saying "my neighbour's brokerage has $6.99 commissions so my brokerage must charge the same". Maybe it does and maybe it doesn't ... the details matter.

Cheers


----------

