YOUR PENSION PLAN AND PLANNING YOUR FUTURE Doug Lauson RCAV - - PowerPoint PPT Presentation

Lauson & Associates Inc.

UNDERSTANDING YOUR PENSION PLAN AND PLANNING YOUR FUTURE

ROMAN CATHOLIC ARCHDIOCESE OF VANCOUVER NOVEMBER 22, 2016 Doug Lauson RCAV Benefits Consultant

Lauson & Associates Inc.

What is a Pension Plan?

• Financial retirement plan in which the Employer

and Employee contribute funds into a pool that is set aside for the employee’s future benefit

• The pool of funds is invested on the Employee’s

behalf and the earnings generate income to the employee upon retirement

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Two Main Types of Pension Plans

• DEFINED BENEFIT
• Paid a certain amount for life
• Based on a formula (Earnings & Years of service)
• Employer & Employee contribute
• Employer is responsible to make the money to

guarantee payment

• If there is a shortfall, the Employer puts in the

differential

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Two Main Types of Pension Plans

• DEFINED CONTRIBUTION
• Employer & Employee contribute
• Retirement income amount not guaranteed because it

depends on how you invest your pension assets

• Based on total contributions made & investment

returns over the years

• At retirement, you use the money in your account to

generate retirement income

• Employer is not responsible to make the money to

guarantee payment – therefore, no shortfall danger to the Employer … more onus on the Employee

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Who has a Pension Plan?

• Any Employer can offer its employees a pension

plan

• Latest study by Stats Can (2012) shows that:
• 37% of male employees have a pension plan
• 40% of female employees have a pension plan
• Fewer than 20% of middle-income earners have

more than 5 years of savings (Broadbent Institute

(2016)

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Lauson & Associates Inc.

By the Numbers (Private Sector)*

• No. of Pension Plans in Canada

15,872

• No. of plan members

3,044,035

• No. of Males

1,955,549

• No. of Females

1,088,486

• No. of DB Plans

9,431

• No. of Plan members

1,369,789

• No. of Males

912,335

• No. of Females

457,454

• No. of DC in Canada

5,612

• No. of plan members

952,630

• No. of Males

608,274

• No. of Females

344,356

• * Stats Canada (2015)

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Terminology

• Plan Sponsor

= Your Employer

• Plan Member

= You

• Service Provider

= Insurance Company

• Service Provider

= Consultant

• RPP

= Registered Pension Plan (DC)

• RRSP

= Registered Retirement Savings Plan

• TFSA

= Tax-Free Savings Account

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How Does It Work?

• Employer decides to offer Employees a Pension

Plan (a.k.a. reward for long service)

• Employer talks to Consultant to design the Plan
• Consultant goes to market with Sponsor’s Plan

requirements

• Sponsor signs agreement with Service Provider

(Insurance Company) to establish plan

• Consultant works for Sponsor and sets up the

plan and its administration (checks/balances, legislation, etc.) with Service Provider

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How Does It Work?

• Employees are educated on understanding and

investment strategies

• Financial Planners may get involved at this point
• Employee works, and makes contributions that

are matched by the Employer, dollar for dollar. (100% interest rate!)

• Investment asset grows based on investment

strategies

• At retirement, Employee decides what to do with

his/her “pot” to generate desired income during retirement (in conjunction with Employees’ other assets)

Lauson & Associates Inc.

Lauson & Associates Inc.

Sample Investment Returns

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Example of Monitoring

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Advantages of a Pension Plan

Group Pension Plans can financially:

• Get 100% interest right off the bat!
• Can generate higher rates of return
• Get lower Investment Management Fees (IMFs)

Group Pension Plans can psychologically:

• Plan for the future through “forced” savings
• Put you in the “Driver’s Seat” about your financial

future

• Take some of the stress out of worrying about how you

will survive after you stop working

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However …

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