Plans & Locked-In Accounts
Leaving a Job?
What should you do with your Registered Pension Plan
Former Employer Pension Plans & Locked-In Accounts
For over a decade we have specialized in helping our client’s navigate through commuting values from former employer pension plans and wind-ups of pension plans.
If you leave your job before your earliest retirement age & you contributed into a pension plan then you will have a number of options available to you at termination.
These options which are based on government legislation and your specific plans rules generally include, but are not limited to:
Staying in the Registered Pension Plan
Each pension administrator has very specific rules, based on pension legislation and the specific plan, on how the funds will be invested and when you may begin to draw income from the pension.
Transferring your pension plan to a new employer
This is handled on a case to case basis.
Commuting the value of your pension to a locked in arrangement with another financial institution
Locked-in retirement account (LIRA)/locked-in registered retirement savings plan (LRSP)
LIRA/LRSP have the benefit of flexibility.
You can invest in the stock market, Mutual Funds, Segregated Funds, Bonds, GICs, REITs, ETF and many other free market options. Similar to a registered retirement savings plan, the earnings of these investments grow tax-free while they remain inside the locked in account, and are fully taxable upon withdrawal.
Upon retirement or at a specified age you can transfer a LIRA or LRSP into a Life Income Fund (LIF) to begin drawing income.
Life Income Fund (LIF)
A LIF is used to pay out the accumulated value of your locked in funds. It’s designed to provide an income that will last a lifetime. Each year the minimum and maximum LIF payment amounts are set by the applicable governments; within this range, you may choose any of the payment options available through the plan. Income for life income fund is taxable in the year it’s received. You can invest in the stock market, Mutual Funds, segregated funds, bonds, GICs, REITs, ETF and many other free market options inside a LIF.
Purchase an immediate or a deferred Annuity from a Canadian life insurance company Annuity
The annuity income depends on several factors, including the value of your account, your age, the type of annuity features selected and the interest rate at the time of purchase. The income is taxable in the year it’s received.
If you have a spouse at the time you purchase an annuity with locked in funds, pension legislation may require that the annuity is set up as joint and survivor. This provides you’re surviving spouse with a lifetime pension of at least 60% of the pension that was payable to you. You are able to purchase and then you were T that doesn’t have the survivor benefit if your spouse signs a waiver form.
- You may designate a child, grandchild, nephew, niece, etc. as the beneficiary of an individual plan.
- There is no restriction on the relationship between the child and you. In addition: For family plans, the beneficiaries must be related to the subscriber by blood or adoption
- You are eligible for a government grant of up to $7,200, or 20% of your annual contributions to the plan (up to a maximum of $500 per year).
- The beneficiary obtains an income tax deferral on his or her investment income.
- You may change the plan beneficiary.
- Your protection against financial market fluctuations may attain and even exceed 100% of the capital invested.
- We pay you an education bonus of up to 15% of the total monthly contributions paid into the Diploma RESP. The bonus varies according to the beneficiary’s age at the time of enrolment.
- Borrow fully secured money. Secured debts are those that are backed up by some sort of asset or guarantee. The most common examples are car loans, Investment loans or mortgages. If you don’t pay, the creditor sells the “security”. A variation on this is to have someone co-sign or guarantee your debt. In this case, they will be granting credit to your co-signer, not you. If you repay the loan, your record will benefit.
- Obtain a secured credit card. Placing a sum of money on deposit with a bank and pledging the money as security for the card does this. If you don’t make your required payments, the bank will withdraw the money from your deposit and reduce your available credit accordingly.
- Start an RRSP. For some reason, banks view people with RRSP’s differently. It demonstrates that you’re looking towards your future and creating POSITIVE NET WORTH. Even a small consistent monthly contribution can go a long way to improving your position with credit grantors. This will cause a marked improvement in your report.
- Borrow when you don’t need to. Obtain a small leveraged investment loan. Make regular payments and over-time, it will have a marked improvement in your credit report.
- After you have paid out your outstanding debt load we will continue to work with you to re-build your credit rating and retirement savings portfolio as well as designing a financial plan to help you, our client, move forward in the short term in a productive and financially healthy manner.
- Moving forward we can show you ways to rehabilitate damaged credit through a variety of financial tools available to us as well as balancing income with expenditures in an attempt to change the very way our client thinks and acts.
- Our ultimate goal is to rehabilitate our client to a point where they can become a debt free, confident member of society with a solid financial plan and firm outlined goals moving forward.
- We are proudly providing proven financial strategies to create, build, protect and transfer your wealth.