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Defined Benefit Pension

Defined Benefit Pension changes are coming!

Defined Benefit Pension changes are coming later this year. Will this impact your pension? Would it make sense to retire before the changes come into effect?

Canadian plan sponsors (i.e., the companies) are finding it increasingly difficult to fund Defined Benefit (DB) pension plans, which used to rely exclusively on employer contributions to provide benefits to employees. With an aging population, interest rates at historical lows, and inconsistent investment performance, additional contributions are needed to adequately fund DB plans. Adding to that, the current economic instability can make finding the required extra contributions very challenging.

In recent years, many companies still offering DB pensions are insisting that employees contribute to the pension plan to help keep the pension plan sustainable. Most DB pension plans are underfunded, which opens the door for potential reductions (or worse) in pension payments to retirees who choose to allow their former employer to manage their pensions after retirement.

Most employers are aggressively switching to contributory pensions, sometimes referred to as capital accumulation plans. Both sponsors (the companies) and participants (the employees) contribute money to these types of plans, which is often then left to the mercy of the markets. It can be extremely difficult, if not impossible, to determine what your pension may be worth when you retire — regardless of how much you have contributed. Some wonder whether capital accumulation plans will provide sufficient retirement income — will you have enough money to last the rest of your life?

Defined Benefit pensions are also affected by the market turmoil as well as the historically low interest rates.

The Actuarial Standards Board of Canada ( determines the commuted values of DB pensions. They are implementing changes to the valuation formula to reflect lower interest rates, an aging population, and market instability.

What will this mean to you?

No two pension plans are the same, and many companies have more than one pension plan. Some will be impacted more than others, but they will all be impacted.

Get your most recent pension statement and book a no-obligation, no-cost initial consultation with me and I’ll help you understand your options.

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For more information, or to review your pension plan options, book a review meeting with me.

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Why provide an employee benefits plan?

Business owners are increasingly recognizing the key importance of implementing employee benefit plans in their organization and this is an area that has grown considerably in recent decades. Employee benefits comprise all of the additional things that you offer to your employees on top of their regular salary, which could include pension contributions, health cover / insurance policies, training and education programs etc. Employees are more and more interested in the total benefits package that a potential employer can offer them, rather than just being focused on a binary salary figure and recognizing and understanding this cultural shift in the modern working world is crucial to maintain your ability to recruit and retain the right talent for your business.

Many employees value the benefits that their employer offers, considering them an integral part of their take home pay, none more so than health cover. This benefit can provide financial and emotional security to your employees and their families, without the need for them to complete any health requirements to be on the plan. They are likely to benefit from a preferable level of cover and the plan may even provide them with insurance products such as long-term disability cover, which can be harder to gain outside of a group plan. What’s more, group plans often offer out-of-country emergency healthcare for employees which has the potential to save them money on personal travel insurance products.

Not only do these benefits provide a sense of security to your employees, they can also help them to feel valued as part of your organization, which may in turn foster higher morale and increased motivation within their roles. It is therefore worthwhile for business owners to encourage their teams to recognize the fact that the benefits package that you offer should be considered as an integral part of their take home pay, alongside their actual salary.

Talk to us, we can help.

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