Pension Plans

Retirement & Pensions

Pension Plans

A retirement savings vehicle that helps individuals save money throughout their working years to provide income during their retirement years. Government pension plans include the Canada and Quebec pension plans and Old Age Security.

Pension Plans

Pension plans can be broadly categorized into two types: employer-sponsored pension plans and individual retirement savings plans.

Employer-Sponsored Pension Plans

Employer-Sponsored Pension Plans are called registered pension plans (RPPs): These are set up by an employer, union or association to provide retirement benefits to their employees. There are two main types:

  • Defined Benefit (DB) Pension Plans: In a DB pension plan, the employer guarantees a specific benefit amount based on factors like years of service, salary, and a predetermined formula. The responsibility for managing investments and ensuring the promised benefits lie with the employer or a pension fund.
  • Defined Contribution (DC) Pension Plans: In a DC pension plan, both the employer and the employee make contributions to the plan. The final retirement benefit depends on the contributions made, investment performance, and the individual’s decisions regarding investments. The responsibility for managing investments and assuming investment risks typically lies with the individual.

Individual Retirement Savings Plans

Individual Retirement Savings Plans are retirement savings plans that individuals can contribute to on their own. The most common type is the Registered Retirement Savings Plan (RRSP). RRSP contributions are tax-deductible, and the funds grow tax-deferred until withdrawal during retirement. Upon retirement, individuals can convert their RRSPs into Registered Retirement Income Funds (RRIFs) to receive regular income payments.


It’s important to note that the specific details, eligibility criteria, contribution limits, and withdrawal rules for pension plans may vary, so individuals should consult with their employers, financial advisors, or the relevant government agencies for accurate and up-to-date information.


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