Three options when you leave
In Ontario, you have the following options when you leave your defined benefit (DB) pension plan before retirement:
- Keep your pension in your plan – Leave your pension in the DB plan and start collecting it when you reach retirement age. This is known as a “deferred pension”.
- Transfer to another pension plan – Transfer your pension to your new employer’s plan if they will accept it.
- Transfer to locked-in retirement savings account (LIRA) – Transfer the cash value of your pension to a LIRA. This option is usually only available if you are under age 55 at the time of transfer.
If you become disabled before retirement
Check with your plan administrator about the disability benefit rules that apply to your plan. If you are off work due to disability, you may be able to continue earning benefits under the plan.
If you die before retirement
In most cases, your spouse (or your beneficiary or estate if you don’t have a spouse) will be entitled to the cash value of the pension benefits you earned to your date of death.
If the benefits are going to your spouse, they may be able to receive them as a deferred pension, or transfer the amount directly to their own RRSP or LIRA tax-free. Otherwise, payments are made in cash and are taxable.
Designate a beneficiary: Designate a beneficiary for your plan, so benefits can be paid directly from the plan upon your death. Your plan administrator can tell you how.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca