Transferring Pensions

Transfer your pension plan from your employer to a locked in retirement account managed by the experienced financial advisors at GTA Wealth.

Transferring Pensions

Transfer your pension plan from your employer to a locked in retirement account managed by the experienced financial advisors at GTA Wealth.

Many of our clients are choosing to transfer their pension plans from their employer to a locked in retirement account and have a financial advisor manage their funds.

Registered Pension Plan’s (RPP) are funded by employee contributions, employer contributions or a combination of both. The goal is to allow a pension income to be received at the employee’s retirement.

With the way RPPs work, the plan’s assets become “fully vested” with the employee after a certain amount of time – in most cases this is a period of two-to-five years. The term fully vested refers to the plan’s funds becoming full property of the employee once a specified age/service requirement is met.

When employees have reached the fully vested stage and leave an employer, they are afforded a choice with respect to their RPP funds. The amounts in the plan have become “locked-in”, and the first option would be to leave it with the former employer and receive a pension income at a later date. The individual would receive their pension at retirement.

The second option is to transfer the locked-in funds to a locked in retirement account (LIRA), which allows an individual the benefit of self-direction as it relates to managing the investments in the plan.

Let’s take a closer look at the two options with a simple case. Consider Michael Cooper, 54 years of age, who is considering leaving his employer at age 55, after many years of service. He meets his advisor who highlights the options relating to his RPP funds.

Keep pension with former employer:

  • Michael has no control over the way his RPP funds are invested.
  • He will have a CPP offset at age 65 – meaning his pension will be reduced from the age of 65 by the amount of the CPP payment.
  • If Michael were to pass away, his spouse Michelle Cooper would only receive approximately 66.66% (two-thirds) of the income.  When Michelle passes, Michael’s children would receive nothing.
  • If the former employer were to become insolvent or declare bankruptcy, there is no guarantee Michael would still receive his pension.
  • Michael would receive a steady monthly cash flow.

Benefits of transferring the pension to a locked in retirement account (LIRA):

  • Michael has full control of the funds; so he is free to choose where assets are invested and ensure proper diversification.
  • There is no CPP offset at 65 – therefore Michael has a full entitlement to both pension plans.
  • If Michael were to pass away, his spouse Michelle (named beneficiary) would receive 100% of the assets.  The children would inherit the assets when Michelle passed.  A very attractive characteristic.
  • It is quite clear that the choice of transferring the pension plan to a locked in retirement account is the better option. It allows flexibility in the form of self-direction, a higher total income received (no CPP offset), and can provide full – rather than partial – inheritance to named beneficiaries.

    Since the funds are locked-in, they cannot be withdrawn prior to retirement (in most situations), or received as a lump sum. Instead, by December 31st of the year in which the individual turns 71, the locked-in RRSP must be converted into a Life Annuity, Life Income Fund (LIF), or Locked-In Retirement Fund (LIRF). In this manner, the LIRA is designed to truly replicate the RPP, but with obvious benefits to the former employee.

    The GTA Wealth Advantage and Your Pension Transfer

    • Independent:  GTA Wealth has an independent financial team.  GTA Wealth can access more that 50 investment firms including the banks to service your needs.  
    • We will select the investments that best suit your needs without any allegiance to a particular company; as opposed to an employee working for one company.  We work for you, not an employer.
    • More resources:  GTA Wealth can access investment firms with offices around the globe and more than $1.6 trillion in assets under management(Fidelity Investments); larger than all the assets under management of the Canadian banks.
    • Unique investment opportunities:  Access to institutional investment managers that have experience managing corporate and government pension funds for more than 40 years.This expertise leads to consistent performance and in some cases, capital preservation.  Access to currency neutral options, and the ability to trade in European countries (via Jitney) that competitors don’t have legal filings to do so.
    • Multidisciplinary approach:  GTA Wealth can provide multiple financial services that will result in efficiency for the client and superior results.  We are able to analyse various facets of your wealth building plan, such as, tax, investments, debt, insurance etc.  Why go to a multitude of financial advisors when you can come to one; an advisor that is knowledgeable about your entire wealth management plan.  Capitalize on the synergy.
    • Tax efficiency:  Access to corporate class funds and tax efficient systematic withdrawal plans.
    • Flexible:  The client can set up monthly contributions from his/her bank account.  Monthly contributions amounts can be changed at any time.  Systematic withdrawal plans can also be set up for clients that need a consistent cash flow.
    • Expertise:  GTA Wealth has tax accountants and certified financial advisors to answer all your tax and investing questions.
    • Enhanced reporting:  Clients can access their accounts online and receive statements electronically.

    Let GTA Wealth help you transfer your pension plan

    Contact or call the Accountants at GTA Wealth Management Inc. toll free at 1 855 GTA WLTH (855 482 9584) for your group benefits requirements. GTA Wealth Management Inc. has three convenient locations in Mississauga, Toronto and Markham to serve you.

    Products or services related to investments, investment recommendations, financial planning, retirement planning, and investment reviews are provided through our mutual fund dealer Security Financial Services and Investment Corp.