I chose a light to illustrate my concept of pension plans (part 1).  In the last two images, you saw me use light to represent how I felt when people tried to educate me about different plans.  To be very honest, when I receive too much information in any field, I feel like I’ve stared at a light too long and I often end up with a headache.  I need a nap.  After doing my research (in my mind and a little on Google), I also remembered that in my first philosophy course, in my first year of College, I had learned about the allegory of Plato’s cave. It has been (a little) difficult for me to understand.  Briefly, it stated that if one or more individuals were living in a cave for part of their lives, they were living in an illusion; this illusion was their truth.  When this individual or these individuals saw the light (the real truth), they were overwhelmed and had the same type of feeling as I did (a headache) and quickly returned to the cave.  That’s kind of how I’d define comfort. Who doesn’t like to be comfortable? In any case, I like it a lot, but I risk being a little less comfortable when I reach retirement age and I won’t have the necessary funds to support myself.

In short, the whole purpose of this introduction was to explain that we are prisoners of our judgments and misconceptions.  All this prevents us from informing ourselves correctly about pension plans, because the information overload blinds us and induces us to go back into our cave after being flooded with information (I thought I was fairly smart to make this connection). Okay, enough. This was also exhausting.  All this to say that I want to share some basic information important for Canadians regarding the first steps to take before planning your retirement.

You should know that the entire article I’m writing today comes from my personal experience.  What I’m telling you can help you.  I don’t know about you, but I learn by talking, because this helps me break down what I have understood and what I should know more about specific subjects.  I’ve therefore decided to share what I’ve learned with as many people as possible.

I recently attended a conference with my colleagues and the same pension plan as me.  I finally understood that, at retirement, there are 3 different levels that allow us to know a little more how and where to look, depending on your occupational situation: the public sector, the private sector and personal.  With our pension plans or our options, experts can inform us about what we need to know to plan our retirement.

Seeing this, I know what comes to mind.  It’s very broad and it doesn’t guide you any better.  Wait and let me explain, because I had the same reaction.  The ultimate goal is retirement with full financial security.  You can then look at one or two of these branches.  In my case, for example, I don’t work directly for the public services, but for an association.

Private sector

So, I have a pension plan with my employer, and it’s personalized.  In this case, you must ask some questions to guide yourself more easily:

  • When can you retire (age or factor)?
  • What is the name of your plan (do you have one)?
  • Are you going to receive a percentage of your earnings (defined benefit pension plan) or will you have a fixed amount for the rest of your life (defined contribution pension plan or RRSP)?
  • What earnings does your pension plan consider (how will it do its calculation)?
  • Must you organize it yourselves or are experts in charge?
  • If your pension plan is managed by experts, what percentage must you pay?
  • Can you choose the amount of money you are going to set aside for your retirement?
  • If you change employers, does the plan follow you or can you leave it with the employer?
  • Does your pension plan keep up with inflation?
  • What are the rules concerning your pension plan (age, percentage, other)?

For the private sector, here are some tips or facts that are good to know.

  1. In some cases, your best 3 years of earnings will be used to calculate the amount you will receive for your retirement.
  2. If you are in a defined benefit pension plan, you do not have the choice of paying the percentage of your earnings it imposes.
  3. If you have the choice of leaving your plan somewhere until you retire, take it. The amount will increase with inflation; it will also increase the interest.  In short, the amount will be greater.  However, if you withdraw, you will lose all the investments you will have made in the plan and you will have to pay taxes.  In some cases, you will only receive the contribution you paid to the plan.

To download the PDF



Public sector:

You will find here the features of your pension plan governed by the Public Service Superannuation Act (PSSA). Federal public service employees are covered by the provisions on the pension benefits offered by the Government, which are commonly known as the “public service pension plan.” For the questions you must ask yourself to do your calculations when you want to retire:

  • How does the pension plan currently operate?
  • Are there information meetings you can attend concerning the pension plans?

For the public sector, here are some tips or facts that are good to know.

  1. The pension plan in the public sector is governed by the Public Service Superannuation Act. There are no optional choices. You must join the pension plan.
  2. Ask for your pension plan statement each year (if it is not provided to you). In some cases, you will be on probation for 6 months and the statement will come in the year counted after that period.
  3. Keep a digital or written trail of all the contributions you are going to pay.
  4. If you change jobs and go into the public sector, leave the plan with the employer. However, if you withdraw your amount, you will lose all the investments you will have made in the plan and you will have to pay taxes.  In some cases, you will only receive the contribution you paid to the plan. However, if you withdraw, you will lose all the investments you will have made in the plan and you will have to pay taxes. In some cases, you will only receive the contribution you paid to the plan.
  5. If you have questions in greater depth, I advise you to go to the Treasury Board Website under the tab “Public service pension plan”.

To download the PDF




Before starting to work for the UCTE, I had my own company.  My earnings then depended on the contracts I obtained.  In this kind of situation, it’s important to know that no pension plan is imposed.  I had no plan for my retirement.  You therefore have to create one yourself.  This section will be useful to you if you don’t have a pension plan or if you own a company.

  • What are the different income sources you will receive during your retirement, coming from your work or the government? (CPP, QCC, pension plan)
  • Have you made investments or purchased shares?
  • Does you family support you or do you support your family?
  • What is your current financial position?
  • Do you follow a budget?
  • Do have income other than employment income? Do you own a company in addition to your work?
  • Do you have an automobile loan and insurance to pay?
  • At what age will you receive the CPP or QCC?
  • Do you have a TFSA (tax-free savings account)?

For your personal finances, here are some tips or facts that are good to know.

  1. I called my bank to meet a personal finance expert, who will help me find an accountant and have me meet a retirement planner. I advise you to call your bank or have an outside meeting to help you manage everything.
  2. It’s important to make a budget based on the plans you have for your retirement. This budget will help you do your planning and make it feasible.
  3. If you earn more than $55,000 a year as gross earnings in Quebec, you must pay attention to your taxes. You will be taxed according to the earnings you receive.  In this case, you will pay taxes at 27.65% and receive $39,793 in net earnings.  Also, everything depends on your province.  Click here to see the tax rates on gross earnings per year.

To download the PDF



In short, regardless of the sector where you are located, you want to have a defined benefit plan rather than a defined contribution plan.  I could give you 1000 reasons why, but what you mainly must know is that one of the plans is infinite and the other one has an end.  The defined benefit plan is like receiving pay calculated according to the details of the plan for the rest of your life.  It is secure, stable and fair.  However, the defined contribution plan is considered to be a pension plan with investments, and thus a fixed amount.  When this amount runs out, there will be no more retirement income from this source.