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Retiring Auto Worker? Review Your Pension Choices!

Are you an auto worker or assembly plant worker recently laid off or planning to retire soon from General Motors Canada, Toyota Canada, or Ford Canada? 

Have you been a long-time employee and are on the Defined Benefit Pension Plan?

It’s important to know your options if you are planning to retire soon or are part of recent employee layoffs.

Pension Solutions Canada has helped dozens of laid-off or retiring auto workers! We will analyze and advise you on each of your pension options, coordinate documents and establish your pension either thru a copycat pension or the commuted value.

Automotive companies offer you 3 choices:

a. Company pension: immediate or delayed

b. Commuted Value [CV]: “Take the cash.”

c. Copycat pension: “purchase of a life annuity”

What do these all look like? Let’s have a look.

1. Take The Company Pension

This is the traditional option. Work for 30+ years, retire and the company pension pays you until your death, then your spouse or partner receives 66 2/3 of that amount until he/she dies. That’s it, that’s all. There is no estate value. There is no ‘final payout’ to your kids, etc. The key question: on your 80th birthday will the pension still be fully funded? How well do you trust the auto company with your retirement money?

2. Commuted Value (CV)

Some people refer to this as: “Take the cash.” Your commuted value is shown on your page “Estimated Retirement Entitlements…”. This is a large amount of money, likely $500k or more, maybe over a million. Please note that commuted values have dropped with the rise in interest rates. If you know a fellow employee who retired in 2020, their CV was much higher. This money comes to you, less a big tax hit (due to the legislation called Maximum Transfer Value). Most of the money comes in a LIRA (Locked-in Retirement Account), the rest as cash less tax. You can put the cash in an RRSP to avoid the tax, if you have any room. Now what? We can help you manage the money with investment funds, diversified, safe and growing. Ask us for details.

3. Copycat Pension (aka Life Annuity)

Auto worker retirees have not used this option until recently although the copycat pension has been allowed by legislation for years. 

Picture this: you are receiving a monthly deposit to your bank account from your pension, except that, instead of that money coming from your auto company, your pension comes from a Canadian financial institution (Sun Life, for example). Think about it, your pension will come, identically, from a Canadian financial institution, rather than a foreign manufacturer.  

The payments for life must be identical to the company pension according to CRA guidelines. 

You don’t pay us, Sun Life or whichever company you choose pays us.

That’s all for now. There is a rush of pension work coming in so connect with us right away to discuss your pension options.

Let’s take a look at your auto worker pension to make sure you’re maximizing your pension amount!

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