Ontario Explores a New Pension Payout Option
Retirement is a time to enjoy the rewards of years of hard work, but choosing how to use your pension savings can be overwhelming. To give individuals more flexibility, the provincial government is considering introducing a new option called the Variable Life Benefit (VLB).
This option would allow retirees to receive monthly payments from their pension savings that adjust based on how the investments perform. Unlike fixed payouts, the VLB would reflect real returns and offer a more dynamic way to manage retirement income.
What’s Changing?
Currently, when you retire with workplace pension savings, you can:
Transfer your funds into a Locked-In Retirement Account (LIRA).
Purchase an annuity to receive stable, predictable monthly payments.
Leave your savings in the pension plan.
The proposed VLB adds a fourth option. With it, your pension savings are pooled into a fund managed by the pension plan administrator. Your payments will vary depending on the fund’s performance and the lifespan of its members, making this a more flexible—but also less predictable—alternative.
Key Details
Investment Growth and Risk: Payments fluctuate based on how the fund performs and the overall experience of members in the program.
Locked-In Funds: Once you choose the VLB and begin receiving payments, your funds are committed to the plan.
Legacy Option: If you pass away before receiving payments equal to your contributions, your beneficiaries may be eligible for a partial return of your savings.
Plan sponsors will be responsible for setting up and managing the VLB, including investment strategies, fee structures, and regulatory compliance. The goal is to balance flexibility for retirees with protections to ensure fairness and transparency.
Why Now?
The government is seeking feedback to shape this framework before introducing it into provincial pension laws. This consultation aims to:
Provide retirees with more ways to use their pension savings.
Make informed decision-making easier for members.
Keep regulatory requirements straightforward for plan sponsors.
Align Ontario’s rules with other provinces offering similar options.
Have Your Say
The consultation period is open until January 10, 2025, and feedback is encouraged. With an emphasis on keeping fees reasonable and disclosures clear, the goal is to ensure that this option serves retirees well while maintaining fairness and simplicity.
Stay informed about changes that could shape your future. As always, thoughtful planning and knowing your options are key to making the most of your retirement. Talk to us today.
