CRPEG Bulletin (2018 December 18)

With the transfer from active contributors to the Public Service Pension Plan complete some of our members have been approached with the “opportunity” to cash out their defined benefit pension plans and invest this money with a local financial advisor or investment advisor.

Ultimately everyone is responsible for making their own decisions about retirement planning.  The CRPEG executive would like to remind you that there are a variety of considerations you need to take into account when removing money from any pension, but especially one with a defined benefit that is backed by the Government of Canada.  One of the unique benefits offered to qualifying members of the public service pension plan is access to subsidized medical and drug coverage.  This coverage is unique in the pension industry and its value cannot be over-stated.  Additionally, as a defined benefit pension, the amount of retirement income available to the member is guaranteed and it is adjusted annually based on inflation.

When seeking financial advice it is not always clear how the individual advising you is being compensated.  The Government of Canada has set up a web page about savings and investments that has advice on choosing a financial service provider and what questions you should be asking.  In Canada there are two classifications of financial services, a financial advisor who manages your money, and a financial planner who helps you plan for retirement.  Only the financial planner has a fiduciary (legal) obligation to always act in your best interest.  The Financial Planning Standards Council recommends that an individual consult both a financial planner and a financial advisor with the caveat that the best practice is to have these be two separate entities, to remove conflict of interest.

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