The following are the major types of pension plans in Canada:
- Defined Benefit Pension Plan - this is the most generous type of plan available and is typical for public sector workers and some private sector ones. The employer is responsible for at least 50% of the money that goes into it and the employee also pays in yearly. The employees' payments result in a loss of their RRSP contribution room.
- Defined Contribution Pension Plan - this is a common private sector plan where the employee contributes to the plan and the employer generally matches that contribution up to a limit. This also reduces the employees' RRSP contribution room.
- Canada Pension Plan - if you earn employment income above about $3,500 then it is mandatory to contribute to CPP. The contributions build up over a lifetime and you can start CPP at age 60 with a reduction in the amount or as late as age 70 with added benefits.
Come to us at Merrick Financial Inc. and we can review how your pension plan fits into your overall financial plan.