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Bank Layoffs: Should You Consider The Commuted Value?

Bank layoffs. Have you been recently terminated by the bank? Your defined benefit pension plan may still offer your choices: transfer to another employer or take the commuted value or is your only option to take the immediate or defered pension.

In a recent YouTube video, Bruce dives into the nitty-gritty of pension options you should consider if you’ve been handed that dreaded pink slip. Let’s break it down, shall we?

Commuted Value: The Golden Ticket 🎫

First off, Bruce talks about the “commuted value” of your pension. What’s that, you ask? Well, it’s basically the present value of your future pension benefits. If you’re not comfortable keeping your pension with your employer anymore, you can opt to move this money out.

Quick Takeaways: Commuted Value

  • Move your pension money out of your current employer.
  • Buy a pension from another company like Sun Life.
  • Your pension is secure, regardless of your company’s future.
  • Consult us, there are tax implications.
  • Are you drowning in debt? Get a new start with the commuted value.
  • Are you ill? Drawing your pension may not offer good value cf. a lump sum.
  • Want to leave a legacy? Pensions leave nothing after 2nd death.

Job-Hopping with Your Pension

Switching lanes to another job? Bruce suggests asking your potential new employer if they’ll accept a transfer of your existing pension plan. This is especially relevant if you’re moving within the same industry, like from one bank to another. Government jobs offer allow this. Small private employers are not likely to allow this transfer.

Ask HR:

  • Will you accept a transfer of my existing pension plan?
  • What are the terms and conditions?

Age Matters: When to Start Your Pension

Bruce points out that if you’re around 45, you might not be able to start your pension until you’re 50 or 55. So, you’ve got to do the math and see if how much your lump sum CV will grow during that period. What’s the math say? Is pension better of CV better?

Age and Pension:

  • 45 years old? Might have to wait until 50 or 55 to start.
  • Check if your pension grows during the waiting period.

The Tax Dilemma

Ah, taxes, the eternal buzzkill. If you’re planning to go back to work and make good money, collecting a pension on top could mean losing a chunk to taxes. Bruce suggests that you delay tapping into that pension. Might be a smarter move. p.s. same is true for CPP & OAS.

Tax Tips:

  • Delay tapping into your pension to avoid high taxes.
  • Consider the commuted value to swallow the tax problem now and invest.
  • Always look to fill up your RRSP to avoid up front income tax.

The Rarely Seen Deferred Pension

Lastly, Bruce mentions the elusive “deferred pension.” You can opt to start your pension at a later date, at a higher amount. This is similar to the commuted value, where you take the cash now and invest it for the future. This option is part of the FORD MOTORS package.

Deferred Pension:

  • Start your pension later for a higher amount.
  • Similar to commuted value but without immediate tax implications.

The Bottom Line

If you’ve been laid off and are in a pension predicament, Bruce Youngblud is just a Zoom call away. Book a free 15-minute chat to discuss your options.

 

Disclaimer: This blog post is intended for informational purposes. For personalized financial advice, it’s best to consult with a professional.

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