ROMAN CATHOLIC ARCHDIOCESE OF VANCOUVER NOVEMBER 22, 2016 UNDERSTANDING YOUR PENSION PLAN AND PLANNING YOUR FUTURE 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 Lauson & Associates Inc.
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 Lauson & Associates Inc.
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 Lauson & Associates Inc.
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) Lauson & Associates Inc.
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) • Lauson & Associates Inc.
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 Lauson & Associates Inc.
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 Lauson & Associates Inc.
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 Lauson & Associates Inc.
Example of Monitoring Lauson & Associates Inc.
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 Lauson & Associates Inc.
However … Lauson & Associates Inc.
Lauson & Associates Inc.
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