OSPC - FAQS - Overview of Manitoba Pension Laws
Analyze Your Options
Example 1 - Should Adam hold, move or transfer his pension?
Adam is aged 32 and belongs to a defined benefit pension plan. He is leaving his job with a Manitoba construction company after six years. His new employer also has a defined benefit pension plan and the two companies have an agreement to let employees transfer their pensions from one company to the other.
Adam got a statement of benefits from his company's plan administrator and is looking at several options: He can leave his pension in the construction company's plan and receive pension income for his lifetime when he retires. He can transfer his pension money to a Locked-in Retirement Account (LIRA). He can transfer the value of his pension to his new employer's plan and have the six years he paid into pension recognized by his new employer's plan. He can do this because his old and new employer have an agreement to transfer pension funds.
Consider this:
By adding these six years of service under his new employer's plan, Adam will get a larger pension at retirement. However, the new plan has better retirement benefits, and they cost more to provide. Adam may need to contribute more money so that all six years can be recognized under the new plan. The extra money going into this plan will reduce the amount Adam can put in his other retirement savings.
Adam decides to talk to a financial advisor before deciding.
Example 2 - Should Sara lock-in or move her pension account?
Sara is 44 and has a large individual pension account, with contributions from her and her employer plus interest in her company's defined contribution plan. Sara is vested, meaning she is entitled to the full value of her account. She will soon be moving to a new job with a Winnipeg publisher which has no pension plan. After seeing her benefits statement, Sara thinks her best option is to transfer the locked-in pension funds to a locked-in retirement account (LIRA), rather than leaving her money in the company pension plan.
Consider this:
Sara's pension plan allowed her to self-direct the investment of her individual account. Sara has done well managing the investment of her individual account while in the pension plan.
Sara decides to transfer the value of her account to a self-directed LIRA.
Example 3 - Should Ali make a one-time transfer?
Ali was working for a company with a pension plan. When he left the company, he transferred his Locked-in Retirement Account (LIRA) to a Life Income Fund (LIF). He is now 55 and can make a one-time transfer of up to 50 per cent of the balance in his LIF to a prescribed Registered Retirement Income Fund (RRIF). The RRIF is covered by the rules of The Pension Benefits Act and Regulations and is not locked-in. He has enough other sources of monthly pension income to live comfortably.
Consider this:
As the name suggests, this is a once-in-a-lifetime option. Ali cannot take another transfer later on during his retirement.
After talking to his financial advisor, Ali decides to apply to do a one-time transfer of 50 per cent of the balance in his LIF. For Ali, the prescribed RRIF gives him added flexibility to manage his retirement savings while keeping the funds and the investment earnings tax-sheltered.
Example 4 - Should Talia and Peter choose a joint or single pension option?
Talia is 58 and is retiring from her job in a personal care home in Thompson. Her pension plan is a defined benefit plan. Talia has been living common-law with Peter for 16 years. Talia is thinking about taking the joint pension with Peter, which is required by The Pension Benefits Act. However, if Peter chooses to waive his rights to the joint pension under the act, Talia can take a single life pension.
Consider this:
Peter has no pension plan at his workplace, but has a large amount of Registered Retirement Savings Plans (RRSPs). If Talia chooses a joint pension (which means Peter gets a lifetime pension, too, even if Talia dies before he does), the amount of pension she receives during her life is less than if she has a single life pension for her lifetime only.
Talia and Peter talked to their financial advisor. Because Peter has enough RRSP funds to retire comfortably, their finances are sound and they are mortgage-free, Peter will waive his right to the joint pension (following the legislation requirements). Talia will choose a single life pension that is guaranteed for five years. She feels comfortable knowing that if she dies before the five years are up, Peter would be the designated beneficiary and get the remaining payments.
Example 5 - Should Yusef go on a cruise now or have more money in retirement?
Yusef is 35 and his employer sponsors a defined contribution plan. Yusef is required to contribute four per cent of his salary and his employer matches his contribution. Yusef can also make voluntary additional contributions that aren't locked-in. This summer Yusef earned an extra $2,700 in overtime which he might spend or save for retirement. His friend Bob wants him to go on a cruise which will cost Yusef $2,200. But, Revenue Canada Agency will allow Yusef to make an additional contribution of $2,155 next year towards his retirement.
Consider this:
The $2,155 he contributes to his pension plan, when added to the $500 he already contributes each year, and the extra tax savings, Yusef will have an extra $19,000 in his pension plan when he retires. If Yusef spends $2,155 going on a cruise, when he retires in 20 years, he has given up $2,133 in tax-sheltered interest alone.
After talking to his financial advisor, Yusef decides to invest in his pension plan.
