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Employer-Sponsored Pension Plans

Company pension plans vary from company to company. Having one does not guarantee lifetime financial security. In fact, many in today’s low interest rate economy are inadequate or underfunded. At Everlife Financial we educate you on your pension plan and advise on the best options for you and your family.

Defined Benefit Plan (DB Plan): This is the ideal pension plan. It guarantees a specific level of pension income, typically a percentage of your income at a certain age or after a certain number of years of employment. Even though the benefits are guaranteed, the contributions are not. As a result, the contribution fluctuates and you may be paying more into the plan than what you would be getting in benefits. Another drawback is that they are not easily portable from one employer to another.

Defined Contribution Plan (DC Plan): Also known as “money purchase plans”, these plans do not guarantee the level of pension income to be paid at retirement. They simply define the amount of the contribution that is made by the employee and the employer. Although the employee bears this risk of uncertainty.

Group RRSPs: These are loose pension programs sponsored by employers and designed to encourage employees to save through easy payroll deductions. Similar to the DC plan, employers usually match the employee contribution. The employee has responsibility for choosing and managing the investments within their RRSP and for selecting their retirement income plan when they retire. Group RRSPs are more flexible compared to DC plans. However, it does not provide the locked-in component that DC plan offers.

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