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Understanding pension plans

Make the most of your retirement

What is a pension plan?

A pension plan is a way to save for retirement. You contribute to the plan throughout your working life and withdraw funds when you retire.

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The 3 main sources of retirement income

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Government pensions and benefits

Public pension plans provide a basic income in retirement. You may be entitled to payments under the Canada Pension Plan (CPP) or the Old Age Security (OAS) program. The amount you receive from the CPP depends on how much and for how long you paid into the plan, while OAS benefits are based on the number of years you have lived in Canada. Low-income seniors are entitled to an additional benefit called the Guaranteed Income Supplement (GIS).

The Quebec Pension Plan (QPP) is Quebec’s equivalent to the CPP. You can receive a pension under the plan provided you have made the minimum contribution required.

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Company pension plans

A company pension plan is a retirement plan that you alone, or you and your employer, contribute to. The income from these plans complements the income received from public retirement plans.

If you change jobs, you may be able to transfer the funds accumulated to your new employer’s pension plan, or move them to a locked-in retirement account (LIRA).

To start making withdrawals, you must transfer your company pension plan to a life income fund (LIF) no later than the year in which you turn 71.

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Couple drinking coffee in their kitchen
Couple drinking coffee in their kitchen
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Tip

Find the right retirement solution for your business. Choose a group retirement plan that maximizes your tax benefits and motivates your employees.

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Personal savings

If your employer doesn’t offer a pension plan, or if you’re self-employed, it’s up to you to save money to supplement your income from public pension plans. Whatever your situation, smart saving now can make a real difference to your retirement lifestyle.

Take advantage of RRSPs, a tax-sheltered retirement savings vehicle. Also consider contributing to a TFSA—another way to grow your savings tax-free. No matter which solution you choose, a systematic savings plan can help. Simply set up automatic withdrawals so that you can put money aside on a regular basis.

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