When you retire from your auto worker job, your company offers you three options for your pension.
First, you can receive your employee pension in monthly installments for a lifetime. You can take your pension as a single lump sum payout based on a present-day assessment of the net total lifetime value of the benefit (which we call the “commuted value”). Finally, you can move that pension to a Canadian insurance company as a “copycat annuity”.
If you’re an auto-worker, you should be especially concerned with the future stability of your pension. During the 2008 economic crisis, two major auto companies declared bankruptcy. Your pension may be reduced if the employer declares bankruptcy. The long-term survival of large companies is no longer a given, as recent closures of Sears Canada, Slater Steel, and others demonstrate.
Think of cutting the cake on your 80th birthday. On that day, will your pension have also turned 80 with you? Will your former employer still exist? What options would your 80-year old self have in the event of another collapse?
Case Study: Bill
An Ingersoll, Ontario-based autoworker – let’s call him “Bill” – recently approached Pension Solutions Canada. He was nearing retirement and didn’t trust that his employer would reliably deliver on his pension plan.
We introduced Bill to Sun Life Financial, who was not only able to match his company’s pension, but also provided him a surplus payment of over $27,000 in taxable payouts directly to his RRSP. They were able to do this because Sun Life, like Canada Life or Desjardins, only required 95% of the money to fund the copycat annuity, not the entire value.
Upon his retirement, Bill and his wife decided to sell their home near Ingersoll and move to Leamington to live out the rest of their days in comfort and peace of mind.
A copycat annuity is an excellent way to provide you with peace of mind, taking your hard-earned pension out of the hands of a foreign-based company whose specialty is making cars, and into the hands of a stable Canadian financial institution. You can de-risk your pension.
Also check out: Defined-Contribution Plan Vs. Defined-Benefit Pension Plan
Bruce Youngblud is a known pension expert in southern Ontario who specializes in helping individuals prepare for retirement. He advises clients on Canada pension plans, auto worker pensions, government pensions, tax planning, and estate planning. Call us at 1-888-554-6661 for a free consultation to analyze and discuss your pension options.
