Employer pension plan

A workplace retirement plan is a plan registered to provide you with a source of income during retirement. Under these plans, you and your employer (or just your employer) make regular contributions to the plan. When you retire, you’ll earn income from the plan.

In the workplace there are two types of retirement plans which are:

  • Defined contribution plan
  • Defined benefit plans

Talk to a human resources advisor or retirement plan administrator to find out how the workplace retirement system works.

If you change jobs while working, you may receive two or more pensions from different employers. You can transfer your old pension to the new system. Talk to a financial planner, a representative from your financial institution, or a human resources representative to find out what options are available to you.

Defined contribution pension plans

In a defined contribution retirement plan, you know how much you will contribute to the plan, but not how much you will receive at retirement. Generally, you and your employer contribute a fixed amount to your retirement system each year.

Defined contribution pension funds are invested in one or more products on your behalf. You can choose how to invest your money. The amount you receive at retirement will depend on how you manage your plan and how well these investments perform.

In general, you will have to choose where to put the money in your defined contribution retirement plan when you retire. Generally, your options are to put your money into:

  • Annuity
  • A registered retirement savings plan with insurance or a registered retirement income fund with insurance
  • A combination of these two options

You can withdraw money from your retirement plan in cash if it is less than a certain amount. Depending on your age and the terms of your retirement plan, you may also be able to invest some of this money into another financial plan, such as a Registered Retirement Savings Plan (RRSP) or an Registered Retirement Income Funds (RRIF).

A retirement plan administrator will usually tell you about your options when you retire. You may want to consider talking to a financial advisor to help you decide how to manage the money in your defined contribution retirement plan.

Defined benefit pension plans

In a defined benefit retirement plan, your employer agrees to pay you a steady income after retirement.

Generally, you and your employer contribute to the plan. Your contributions are pooled into a fund. Your employer or retirement plan administrator invests and manages the fund. You do not have to exercise any investment options.

The income you earn in retirement is generally calculated based on your salary and the number of years you’ve contributed to the plan. This is a fixed amount regardless of the result of the investment.

The amount you receive periodically to help cover your living expenses may increase as your total cost of living increases. This is often referred to as an index pension. Ask your human resources advisor or retirement system administrator if you will receive an indexed pension when you retire.

Group Registered Retirement Savings Plans (Group RRSPs)

A Group Registered Retirement Savings Plan (Group RRSP) is an employer-funded retirement savings plan.

You open a personal RRSP, but you pay for it through your employer. You contribute through periodic deductions from your salary. Your employer can also contribute to the RRSP on your behalf.

The details of the RRSP vary by employer. To learn more about the RRSP for your group, talk to your human resources manager or the retirement system.

Pooled Registered Pension Plan (PRPP)

The Pooled Registered Pension Plan (PRPP) are intended primarily for people who do not normally receive a pension at the workplace, such as employees of small and medium-sized businesses and the self-employed.

PRPPs are similar to defined contribution pension plans. In defined contribution plans, your employer (and you, in some cases) contributes a fixed amount to your pension each year. However, with PRPP, the business owner does not have to add money to the plan. You can choose not to participate in your employer’s PRPP.

Your PRPP funds are invested in one or more products on your behalf. The amount you receive at retirement will depend on the performance of these investments.

Voluntary Retirement Savings Plan

If you work in Quebec, you may qualify for a voluntary retirement savings plan if your employer does not offer a PRPP. These savings plans are similar to PRPPs. It is generally offered to employees who do not have an employer pension and to independent employers.