10 Jul If I leave my current company, what happens to my pension plan?
I have decided to leave my current company and work for someone else. Am I still eligible to receive the money invested in my pension plan?
You may have been consistently investing money into your pension plan for years with your current employer, but you have just been offered another job that you want to accept. But if you do take this job, what happens to the money you and your employer have been investing into your pension plan?
If you are planning to begin a role with a new employer, you may be entitled to nevertheless receive the money your employer has invested into your plan. Once the employer invests money into your retirement, it is possible that this money is owed to you. However, there are cases where the money cannot be provided unless the employee has worked a certain number of years with their current employer. If you decide to depart from your current company before this period, then you may be entitled to receive only the value of the funds you have individually invested into your pension plan.
What happens to your pension funds greatly depends on the specific pension plan your employer has created for you and the legislation governing your region. In Ontario, if you leave your current employment relationship that promised a defined benefits plan, you may be eligible to transfer the funds you have invested with your current employer to a new pension plan with your new employer. Another option that may be acceptable in this case is to leave your money in the current pension plan. If you are eligible to leave the funds where they are, you would receive a pension benefit when you eventually retire. A pension benefit is money that can consistently be owed to you once you retire. Further, you may be able to use the pension funds to invest in an alternate plan like a Locked-In Retirement Account (LIRA). If you choose to invest in a LIRA, you will not have access to this money again until your retirement commences.
If you have been planning to receive a defined contribution plan, you may still leave your money in the current investment. If you can leave your money in your current pension plan, they may still charge you a fee even if you are no longer working for the company. Comparable to a defined benefits plan, you may also decide to invest your pension funds into an alternate investment like a LIRA. Lastly, you may be able to purchase an annuity from an investment company with your current pension funds. You would pay the entire amount to an insurance company upfront, and they would pay you an amount of compensation over a period once retired until the payment is completed.
If you have any further questions about your pension plan, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.