Time To Revisit Your Employer Sponsored Pension Plan

When you started with your employer (or soon after) you were likely given a huge benefits package to complete and return.  Part of this package was probably some sort of employer-sponsored pension plan.  Some plans – usually a defined benefit plan – are mandatory, but of the remaining pensions plans a large percentage of employees neglect to participate for some reason.

If you are in this group – whether you think you can’t afford it, or don’t have the time or expertise to make the investment decisions – I urge you to reconsider, especially if your employer has some sort of matching program.

What Type Of Pension Plan Do You Have?

If you are unclear about what is being offered or what you’ve signed up for, contact your benefits office and find out the following:

  • What type of pension is being offered: defined benefit, defined contribution, or group RRSP.
  • Do you have a choice of how and where your money is invested?  What are the choices?
  • Is there information available about the investments?  Can you make changes and how often?
  • Past performance of the investments within the pension plan.
  • The maximum (usually a percentage of salary) you can invest annually.
  • Does the company contribute to the pension plan, and if so, how much?
  • What is the vesting period?
  • If you leave the company, what happens to your money:  can you leave it there, add it to another employer plan or transfer to a locked in RRSP?

Review Your Plan

Instead of filing away your annual statement, take a look at the plan in view of your total financial objectives.  A lot of employees tend to be very conservative with their pension investment when they are first starting out, but once you have a substantial amount in fixed income savings like GIC’s or Money Market funds you may decide to branch out and take on a bit more risk – perhaps an index fund or balanced fund.  Usually the initial decision is not set in stone and you can make ongoing changes.

Now you have the time to make an informed decision, review all the material and your past statements.  Are you satisfied with your pension plan or is their room for adjustment and improvement?

This will be part of your future income so it’s important to take it seriously.  Now run, don’t delay, to your benefits office and take charge of your future.

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  1. My University Money on July 19, 2011 at 6:50 am

    As a teacher we have a pretty massive defined benefit plan, and it actually manages to return pretty close to the index every year which is amazing considering the screw ups in many other pension plans. I of course love mentioning to all the Unionistas that the plan is an absolute waste of time because we could just invest in about 3 different ETFs/Indexes and get an even better return on our money. They look at me sideways and disbelieving, after all, we pay millions every year for a big bad professional to handle our dough, what does the young punk know?

    I often wish that I had a defined contribution plan so that the money was in my control. With so many older teachers retiring, and myself being so far away from retirement, I am really really nervous that my money will not be there for be when I retire. I also hate the idea that it is mandatory that someone can take my money from me and tell me when I can have it back.

  2. My Own Advisor on July 19, 2011 at 3:53 pm

    Good tips, re: “if you are unclear about what is being offered or what you’ve signed up for, contact your benefits office and find out…”

    You can’t change what you don’t know 🙂

    @My University Money – don’t wish you had a DC plan, a DB plan is a major gift – especially your teachers’ plan! Sure, you might be in charge with your 3 ETFs but this DB plan is absolutely a no-brainer. And, your money should be there when you retire, otherwise, they will be a small revolution in this country if not.

    When my wife and I got our jobs, we had a choice. She went DC (before I met her I might add), I went DB. Over the last couple of years, we’ve switched all her DC funds to indexed products; 50% Cdn equity, 10% U.S. equity and 40% bond. Unless something significant changes, we’re going to keep it that way for another 20 years until she is ready to retire or work part-time around 55.

    I left my former employer and had my DC plan to take with me. All of it is now in a LIRA, in KO stock 🙂

    Any employer sponsored pension plan is a major bonus, always take the free money when you can get it.

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