Contractor vs Perm employee\pension

It depends on the company, when interviewing you can ask for details on the pension and work out the math. Most companies these days do defined contribution pension which is basically the same as an RRSP, but government jobs and a few odd companies will still do defined benefit, where the pension will be paid on some formula like 1.3% x years of service x avg best 5 years salary. But the formula will differ from company to company.

sketty55 wrote: ↑ Hi all. I've been a contractor for a number of years but trying to evaluate if it would be worth it for me to switch to a perm position with a company pension. I am expecting to work for another 15-20years, and i'm trying to understand what the average monthly pension would be after working this time and if this would be favourable or if i should just continue as a contractor and adjust my retirement investments as needed. Appreciate any advice on what i should be looking at to make this decision.

Most places these days won't have a "pension" per se, they will offer some form of RRSP match. So instead of figuring out a benefit level, you can just figure out the added dollar benefit (they could also give other benefits like dental and expanded health insurance). These arent the best for anticipating what you'll need for how long, but it will be easy for you to analyze what they are worth to you relative to working on contract.

If it is a place with a real pension you would need details from that company on the level of that pension, but the benefit is usually defined by years of service, salary, and contribution level. COming into it late you will also want to know what the dates are for the earliest you could retire with an unreduced pension.

nevyn1234 wrote: ↑ Most places these days won't have a "pension" per se, they will offer some form of RRSP match. So instead of figuring out a benefit level, you can just figure out the added dollar benefit (they could also give other benefits like dental and expanded health insurance). These arent the best for anticipating what you'll need for how long, but it will be easy for you to analyze what they are worth to you relative to working on contract.

If it is a place with a real pension you would need details from that company on the level of that pension, but the benefit is usually defined by years of service, salary, and contribution level. COming into it late you will also want to know what the dates are for the earliest you could retire with an unreduced pension.

And whether you can buy back years of service, which is more often than not recommended. Likely not possible coming from a contract position, though.

I was able to buy back 7.5 of the 10 years of my past service when I joined the federal public service, and it didn't cost me any more than a transfer of the DCPP account from my previous company and a few thousand transferred from my personal RRSP.

Dynatos wrote: ↑ And whether you can buy back years of service, which is more often than not recommended. Likely not possible coming from a contract position, though.

I was able to buy back 7.5 of the 10 years of my past service when I joined the federal public service, and it didn't cost me any more than a transfer of the DCPP account from my previous company and a few thousand transferred from my personal RRSP.

That was lucky. A lot of even public plans (I am in HOOPP) only allow buybacks from time on leave from a hoopp employer or from prior pension plans. Could not buyback with my RRSPs

nevyn1234 wrote: ↑ That was lucky. A lot of even public plans (I am in HOOPP) only allow buybacks from time on leave from a hoopp employer or from prior pension plans. Could not buyback with my RRSPs

My previous employer had a registered DCPP that qualified for past experience as a "pension plan". The value of that DCPP wasn't enough to cover the full buyback, but I was permitted to transfer some of my personal RRSP, pay in cash if I had RRSP room, or pay over time (with penalty) as additional deductions from my pay.

sketty55 wrote: ↑ Hi all. I've been a contractor for a number of years but trying to evaluate if it would be worth it for me to switch to a perm position with a company pension. I am expecting to work for another 15-20years, and i'm trying to understand what the average monthly pension would be after working this time and if this would be favourable or if i should just continue as a contractor and adjust my retirement investments as needed. Appreciate any advice on what i should be looking at to make this decision.

I would say that it depends on the company pension plan as well as your salary as a contractor as well as the proposed salary of a permanent employee.

In the last 2 companies that I've worked at which offered a pension plan, both were defined contribution plans (so no guarantees in the future). Where I'm currently working, certain employees due to the year which they were hired have portions of a defined benefit plan so they have some sort of guarantee at the end. I don't know much about it except it is obviously better for the employee (otherwise the company would have continued to offer it to employees hired after that year).

If the company is offering a defined contribution pension plan, the only benefit is the matching since there are no guarantees of minimum amounts that you will be entitled to get when you retire. This means that if the employee contribution is 4% and the company matches this at 4%, it is like getting an additional 4% on your salary to invest in an RRSP if you were to do this yourself.

Having a pension plan decreases the amount that you can contribute to an RRSP but the same amount. For a defined contribution plan, this means that in the span of a year, you contributed $2k to your pension plan and the company matched it with $2k (which represents your company pension account having a combined contribution of $4k), your RRSP amount that you're allowed to contribute the following tax year is decreased by $4k.