Many people are growing nervous around their defined-benefit pension plan because they are uncertain about the financial viability of the company they work for. They don’t know whether the company will be around in 10, 20 or 30 years. Typically, they face the choice of either taking the pension or taking the cash value of the pension, known as commuting, and investing the funds. The decision to commute a pension is rare because of a significant initial tax hit and, as a result, the difficulty in recreating the income stream.
There is another option called a ‘copy cat’ annuity.
Here you can move your pension funds to an insurance company tax-free if they can provide the same or similar income stream, options and guarantees. This transplants the risk from the individual company to the insurance company. Moreover, the customer protection plan – Assuris – provides guarantees on $2,000 a month or 85% whichever is higher. As a result, you can strategically use multiple insurance companies to protect the entire income stream.
If you have any questions let me know. We can help review the options with you and, if it makes sense, transfer your pension into a ‘copy cat’ annuity at Assante.
Alexandra Macqueen of the The Globle & Mail wrote a piece on this in January if you would like to learn more.
February 26, 2018
