Leaving a job: should you leave your pension fund or transfer it?
When changing jobs or leaving the workforce, you’re faced with an important decision: what should you do with the pension funds accumulated under your former employer’s plan? Many people think it’s simpler — and safer — to just leave everything as is. However, this approach isn’t always the most optimal. It’s essential to understand the available options, the financial implications, and the broader planning considerations in order to make an informed decision.
Understanding what you hold
First, you need to distinguish the type of plan you were contributing to:
-
Defined benefit pension plan (DB plan): you receive a predetermined pension at retirement, often based on your salary and years of service. This type of plan is rare in the private sector but still common in the public sector.
-
Defined contribution pension plan (DC plan) or locked-in retirement account: the value of the plan depends on the contributions made and the investment returns.
The type of plan influences your options. In a DB plan, it may be advantageous to keep it if the plan is well funded. In a DC plan, you might consider transferring your funds to an account that offers more flexibility and potentially higher returns.
Leaving the plan as is: advantages and disadvantages
Leaving your funds in the existing plan may seem logical, especially if you don’t intend to use them until retirement. It avoids making immediate investment decisions and can provide a sense of stability.
In a DB plan, if you’ve accumulated significant years of service and the plan is financially sound, the future pension can be very attractive. The plan may also include cost-of-living indexation and survivor benefits.
However, even in this case, some risks remain:
-
You lose control of your capital.
-
The plan can be changed by the employer or face an actuarial deficit.
-
You have little flexibility in the event of a change in plan or goals.
In a DC plan, keeping your money in the former plan often means being limited in your investment options, sometimes with higher fees or lower returns.
The other option is to transfer the funds into a vehicle such as a Locked-In Retirement Account (LIRA) or a Life Income Fund (LIF) when the time comes. This approach gives you more control over:
-
Choosing investment products according to your investor profile
-
The timing and pace of withdrawals (subject to age and minimum income rules)
-
Tax optimization through personalized planning
-
The transfer to heirs in the event of death
A transfer often allows you to better integrate these assets into your overall retirement plan. It also offers the opportunity to consolidate multiple former plans into a single structure for easier management.
However, be cautious: this choice means assuming market risks, having a certain level of knowledge or proper advice, and complying with the tax rules specific to retirement savings vehicles.
Leaving your pension fund in a former employer’s plan can sometimes be advantageous, but it’s not automatically the best decision. Every situation is unique. Your financial context, the stability of the plan, your long-term goals, age, and investor profile are all factors that should guide your choice. Consulting an independent financial planner often helps assess different scenarios and avoid missed opportunities.
-
Retraite Québec – “What to Do with Your Supplemental Pension Plan When You Leave Your Job?”
https://www.retraitequebec.gouv.qc.ca/fr/publications/rrq/rcr-changement-emploi/
-
Autorité des marchés financiers (AMF) – “Leaving Your Job: What Should You Do with Your Pension Plans?”
https://lautorite.qc.ca/grand-public/investir/investissements/produits-retraite
-
Quebec Institute of Financial Planning – “The Choice Between Transferring or Keeping Your Pension Plan”
-
Government of Canada – “Registered Pension Plans”
https://www.canada.ca/fr/agence-revenu/services/impot/entreprises/sujets/regimes-retraite/rpa.html
-
FTQ Fund – “What to Do with Your Pension Plan When Changing Jobs?”
https://www.fondsftq.com/fr-ca/retraite/changement-emploi-regime-retraite
