Demystifying Pensions – Podcast on Explore FI Canada

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Demystifying Pensions – Podcast on Explore FI Canada

If pensions have you confused, this episode’s for you!

I was interviewed on a fun podcast with Chrissy and Money Mechanic from Explore FI Canada answering questions from a listener named Kate about her pension.

Kate asked her questions in an entertaining way that showed her frustration with not understanding her options.

We discuss DC and DB pensions, commuting, LIRAs, and more. Simple, clear info to help demystify the whats, hows, whys behind pensions in Canada.

Here is the link:

Demystifying Pensions – Podcast on Explore FI Canada



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  1. Kevin Houlgate on September 20, 2020 at 4:43 PM

    Another good episode.
    There has been some discussion on the FI forums about some legislative changes coming this year to Commuted Value calculations…specifically in some of the actuarial assumptions that are used. The word is that after these changes, commuted values for DB pensions will be lower. Are you aware of this? Is this just a provincial change or will it affect federal pension plans too? I have seen some articles discussing the changes but haven’t found the original source or details of which pension plans will be affected.

  2. Ed Rempel on September 20, 2020 at 8:12 PM

    Hi Kevin,

    Yes, there is new pension legislation. Here it is: .

    This should apply to all defined benefit pensions in Canada, unless they have a specific exemption to using the very low current rates.

    Most pension today are using super-low discount rates of 1.4% for 10 years and 2.4% after that. So you understand how this works, if your pension is supposed to pay you $30,000/year rising by inflation starting 20 years from now, you need about $850,000 today to make those pension payments with investment return rates of 1.4% and 2.4%.

    I thought at first these super-low rates related to the bond portion of their portfolio only, but it relates to the full value of the pension.

    Commuted values will be lower, and probably quite a lot lower.

    We have been trying to figure out how big a change this will have. I believe the pensions will choose a more normal discount rate about 5%, or at leat 4%, which could mean a much smaller commuted value effective December 1.

    If you quit your job and request your pension, they use the date you request it, not the date the pension is paid out, so there is still a little time.

    We have several clients that were planning to retire or quit their job in the next year or 2 anyway, where we are helping them figure out whether or not this legislation change makes it worthwhile to quit or retire now.


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