Your life situation can change at any time. What if you take time off work to have a baby? What if you become disabled, divorced, or die before you retire? Make sure you understand how this affects your pension.
What happens to my pension if I take time off work for a new baby?
You can choose to stay a pension plan member during your time off work. You must keep making any required pension contributions. Your company must also continue its contributions.
What happens to my pension if I divorce?
Your pension will be included in the assets that you share with your spouse when you divorce. Depending on what province you live in, one of these three things could happen:
- You make a fair trade: Your ex-spouse agrees to let you keep your pension and takes something else of equal value. They may take another pension plan, some savings or investments, or even property. The hard part is to figure out what your pension is worth at the time you divorce.
- You divide it up now: You and your ex-spouse agree to split up the pension. Your plan transfers your ex-spouse's share to his or her personal Registered Retirement Savings Plan (RRSP). Check to see if your plan allows this.
- You split the pension later, when you retire: The plan will pay part of the pension to you and part to your ex-spouse. It's up to your ex-spouse to make sure they get their share when you retire.
What happens to my pension if I become disabled before I retire?
You may be able to receive special benefits from your pension plan. You may also qualify for disability payments from the Canada Pension Plan (CPP).
- For defined benefit plans: These may offer a disability pension. You may also be able to earn credits toward your pension even though you've stopped working. When you reach your normal retirement age, your regular pension payments start.
- For defined contribution plans: If you get payments from a workplace disability program, you're still considered an employee. This may mean you can't take money from your retirement savings. However, your employer may continue to contribute to your pension until you retire.
- For Group Registered Retirement Savings Plans (Group RRSPs): You can withdraw money any time you like, as long as your employer agrees. Your employer may continue to contribute until you retire.
What happens to my pension if I die before I retire?
- For defined benefit plans: The person you leave your money to (your beneficiary) will receive a payment based on the pension you've earned before your death. It can be paid in a lump sum when you die, or as regular pension payments to your spouse when he or she retires. See your annual statement for details.
- For defined contribution plans: Your beneficiary will receive all the money in your account. Again, you can check the amount on your annual statement.
- For Group RRSPs: If you named a beneficiary when you set up the plan, the money will pass to them. If you did not, it will go to your estate. Make sure you understand how taxes will affect your beneficiary.
Remember: Don't forget about your pension if life changes
Even if you can't spend it, you or your beneficiary may still have rights to the money in your plan. Talk to your plan administrator to find out more.
Read the Financial Services Commission of Ontario's brochure.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.