Types of plan pensions

If you have been a member of a defined contribution pension plan and you are ready to retire, you have several options.

Your plan must provide all of the following:

  • Normal pension: the pension payable at the normal retirement age (65 unless your plan provides otherwise)
  • Deferred pension: the pension you to which you are entitled but which must be paid later because it is still too early for you to receive your pension
  • Early pension: a pension paid before the normal retirement age (between 55 and 65, unless you plan provides otherwise)
  • Postponed pension: a pension paid after the normal retirement age (after 65 unless your plan provides otherwise)
  • Additional pension: a pension amount added to your regular pension and based on sums transferred to your account from another plan

Your plan may provide:

  • Additional pension: a pension amount added to your regular pension and based on your addition voluntary contributions (if any)

Your plan may also entitle you to cash payments (refunds).

Your age is a deciding factor for the type of retirement pension to which you are entitled.

Your age and the normal retirement age under the plan are taken into account. The normal retirement age is indicated in the plan summary for your plan.


Note that...

You cannot be forced to take your retirement when you reach the normal retirement age under your plan.

However, payment of your retirement pension must begin no later than 31 December in the year in which you reach age 71, even if you continue to work.

Pensions are not paid automatically. You must apply to your plan administrator.



Important ...

The younger you are when you retire, the lower your retirement income will be. Be sure that you have enough income for your retirement needs. You may want to see a financial planner.



Normal pension: the pension payable at the normal retirement age

Your plan must provide for the payment of a "normal pension", that is, a pension payable as of the normal retirement age under the plan. It must be a life pension, that is, payable until you die.


Note that...

The normal pension is payable when you stop working at the normal retirement age that is set under your plan (usually 65). It will not be paid automatically. You must apply for it to your plan administrator.



A helpful example...

Suppose that you stopped working at age 65, which is the normal retirement age under your plan. You made an application to receive your pension as of age 65. You will receive the normal pension under the plan, that is, the pension that can be paid at that age using your account balance.

Deferred pension: the pension you to which you are entitled but which must be paid later because it is still too early for you to receive your pension

If your active plan membership ends and you are not yet old enough to receive a pension under your plan or if you are old enough but you do not want to begin receiving your pension right away, you are entitled to a deferred pension, whose payment will begin at a later date.

You can request payment of your pension when you are 10 years or less away from the normal retirement age under the plan (for example, at age 55 if the normal retirement age is 65) whether you continue to work or not.

Early pension: a pension paid before the normal retirement age

You are entitled to an early pension if you stop working during the 10 years that precede the normal retirement age under the plan (whether or not your active plan membership has ended).

A pension plan may give you entitlement to an early pension at an earlier time, that is, before you are at least 10 years away from the normal retirement age. For information about your plans rules, consult your plan summary.


Note that...

If your active plan membership ends more than 10 years before the normal retirement age and you want to receive your pension before the normal retirement age, you can ask for payment of your deferred pension at any time provided you are no more than 10 years away from the normal retirement age.



A helpful example...

Suppose that the normal retirement age is 65. Your active plan membership ends before age 55. You can apply for payment of your pension as of age 55.

Postponed pension: a pension paid after the normal retirement age

You are entitled to a postponed pension if, when you reach the normal retirement age, you continue to work for the same employer. The payment of your pension will be delayed unless you and your employer agree otherwise. Payment of your pension will begin when you stop working or no later than 31 December of the year in which you reach age 71.

If you continue working but your pay is reduced permanently, for example, because you have reduced your work hours, you can apply to immediately receive a portion of your pension as a way to offset the reduction in your pay.

Additional pension: a pension amount added to your regular pension and based on sums transferred to your account from another plan

You are entitled to an additional pension based on sums that were transferred from a previous pension but that cannot be directly refunded to you.

The additional pension will be added to your retirement pension.

Additional pension: a pension amount added to your regular pension and based on your additional voluntary contributions

If your plan so provides, you may be entitled to an additional pension based on the conversion of your additional voluntary contributions (contributions that you made and which were not accompanied by a corresponding employer contribution)

The additional pension will be added to your retirement pension.


Other useful links

Did you know?

"Life pension" is paid until death occurs.
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