The New Pension

When you change jobs, you sometimes have the option of transferring your pension plan to another financial institution, into a ‘locked’ in registered plan. This ‘locked in’ plan has to operate under the same rules as your original pension plan and you cannot begin to make withdrawals until your pension plan would allow payments to begin.

The plan is converted to a LIF (locked in fund) at that time and you may begin your withdrawals. There are annual minimum and maximum withdrawal amounts; typically the maximum is recommended so that more of the funds are in your control and not locked in. Advisors have to take great caution advising clients to transfer their funds from a pension plan, a guaranteed income for life (with possible survivor benefits to your spouse if that is how you structured your plan). There is much to be said for a guaranteed annual income – it means that your income keeps being paid no matter how much the stock market declines and your income does not go up and down according to how well your investments have done. An advisor managed portfolio cannot guarantee income for you and your spouse’s lifetime; an option that comes close to the same benefits as offered by your pension plan is an annuity – an annuity pays you a set amount for your life, and, can be set up with a guaranteed amount for your spouse after your death.