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.