For many clients, their pension entitlement is their most significant asset. At different times in their career they may be given an opportunity to increase their pension by buying back service or in other cases leave the plan completely by transferring out the commuted value. In both cases the values are significant, the tax impacts daunting and the investment decision difficult.
We are familiar with a wide variety of employer plans and from experience we suggest you gather the following information as applicable to ensure our meeting(s) are as efficient as possible:
- Expected income from all other sources
- Net worth
- Medical history, family related life expectancy
- Personal expectations re inflation, investment performance
- Estate related goals and details of any financial dependants
- Possibility of pensionable service transfer to new employer, reciprocal arrangements
PENSION PLAN RELATED
- Pension commencement date
- Formula for reduction if taken sooner
- Indexing rate between date of retirement and pension commencement date.
- Indexing rate upon commencement.
- Effect on pension due to integration with CPP. Does the initial pension have a portion which reduces later, normally age 65. This portion is sometimes shown separately as a bridging amount.
- What is the guaranteed term of the pension?
- What are the provisions for surviving spouse upon death of pensioner? What % of the original pension would continue to the spouse? Is the pension quoted based on a single life annuity and if so what is the reduction in monthly pension to provide for survivor benefits?
- If the initial decision is to defer the pension, what options are available to commute the pension later before it commences?
- What benefits are available as a member of the pension plan that would not be if the employee withdraws the commuted value, (such as health plan, subsidized services).
- If the employee dies before pension commencement what benefits accrue to his spouse or his estate?
- What is the funded status of the pension plan and are there concerns about the employer’s ability to fund shortfalls
- Total cost with allocation between pre -1990 service and post 1989.
- Years of service designated as while a contributor to a plan.
- Available unused RRSP room and existing RRSP assets.
- Estimated Past Service Pension Adjustment (if any)
- Financing options offered by employer
- Total commuted value of the pension, with a breakdown of what portion, if any, will be taxable.
- Effective date of transfer, interest rate from that date forward.
- Estimated Pension Adjustment Reversal ( PAR) if any, upon transfer.
- Jurisdiction that pension is governed by, ie Federal, Provincial
- Percentage of total commuted value transferable immediately (in cases where plan is underfunded).