Personal Finance

Registered pension plan or LIRA

  • Last Updated:
  • Oct 3rd, 2020 10:27 am
[OP]
Deal Addict
Sep 13, 2003
1289 posts
116 upvotes

Registered pension plan or LIRA

I'm trying to make a decision regarding my RPP and before I make any rash and uninformed decisions, I like to try to fill in any gaps in my knowledge. The insitutation that my RPP is with is pushing me to stay with them, but I'm sure that's just a sales tactic.
So I had been terminated from my employer and have a decision to make regarding my registered pension plan. Is it with a plan administrator institution (Institution #1) and have the option to transfer to a personal account with the institution or transfer the locked-in amount to either institution (Institution #2) or LIRA of my choice at (Bank #1)

Institution #1 - plan group administrator
Institution #2 - employer's prior plan group administrator before pension got moved to instit. #1
Bank #1 - my personal bank


Pros with staying with the current institution #1:
- can't think of any other other than it's another large organization

Cons to keep with current instit #1.:
- recently moved there by the employer and i haven't bothered to look at their list of fund options as I debate my options.
- the UX isn't great, much more ancient than instit #2
- managing the pension here, and pension at instit #2 and my self-directed investments at bank #3 is a bit of work.

Pros to move to instit #2
- my RRSP is there


Pros to move to bank #1
- my personal self-directed investments are there
- familiar and comfortable with this bank's interface
- access to all sorts of ETFs and stocks


I think my investment managing is average. I manage my self-directed investments at bank #3 mostly using the CCP strategy + some selected stocks.


My gut currently is to move my pension to the bank (new LIRA account), but are there benefits with staying with either instit #1 or moving it to instit #2? What about when I retire and managing the payout in the future? I am decades away from retiring. I'm curious if others would recommend me that I keep it with the plan administators for reasons I'm not aware of?
9 replies
Jr. Member
Sep 27, 2012
163 posts
74 upvotes
GVA
Move to your personal bank and control everything yourself.
Deal Addict
Sep 14, 2012
1857 posts
1331 upvotes
Montreal, QC
drey wrote: I'm trying to make a decision regarding my RPP and before I make any rash and uninformed decisions, I like to try to fill in any gaps in my knowledge. The insitutation that my RPP is with is pushing me to stay with them, but I'm sure that's just a sales tactic.
So I had been terminated from my employer and have a decision to make regarding my registered pension plan. Is it with a plan administrator institution (Institution #1) and have the option to transfer to a personal account with the institution or transfer the locked-in amount to either institution (Institution #2) or LIRA of my choice at (Bank #1)

Institution #1 - plan group administrator
Institution #2 - employer's prior plan group administrator before pension got moved to instit. #1
Bank #1 - my personal bank

I was in a somewhat similar situation to you and for me, my options were:
1) keep my RPP and RSP at the plan group administrator where I was no longer an employee (so I wasn't benefiting from a lower MER fee structure)
2) transfer my RPP and RSP to my current employer's group plan
3) transfer my RPP and RSP to a financial institution that I already bank with and already had an investment account with (RPP would be transferred to a LIRA)

I picked option #3. Since I wasn't getting a subsidized rate, there was no real point in me picking option #1 except me not wanting to go through the process of switching. My current employer's group plan (option #2 for me) doesn't have a lot of investment choices so I didn't transfer it there (and I don't believe that my current employer's group plan would cover the transfer/closing fees)

Based on the amount of money we were referring to, with option #3, my financial institution covered the transfer/closing fee of my accounts from the other institution (it was ~$120 for my RPP and ~$120 for my RSP). Choosing option #3, also I increased my investment options over keeping it with option #1 and on top of that, I have a much better user interface/options with my financial institution's investor's website.

I did this in January 2020 and with the market downturn in February/March timeframe due to COVID-19, I just need to make my money back prior to the move but me having moved my money probably wouldn't have affected my "paper" loss amount since I would have probably loss a similar amount keeping it with option #1 even though I changed investments so I don't regret my choice of having moved my money out (and changing my investments).
Deal Fanatic
Feb 15, 2006
8937 posts
3458 upvotes
Toronto
What does your RPP give you? Many company pension plans are professionally managed, so it takes the headache out of you, wanting to manage/invest yourself. But some plans also come with health coverage, or other benefits. If you move it away, you lose all those benefits, unless there are some rules about keeping some in, to still get benefits.

You're asking about LIRA. Does that mean you want to "commute" your pension, take most of it out, while leaving what still needs to be locked in a LIRA? By doing that, you need to manage/invest yourself.

How much, and what's the timeline you have, family to support, financial needs/obligations, and what's your risk tolerance? Do you want to invest all yourself, or have professional do for you? All those are more important, than having account(s) in financial institution 1 or 2 or 3.
[OP]
Deal Addict
Sep 13, 2003
1289 posts
116 upvotes
lmcjipo wrote: I was in a somewhat similar situation to you and for me, my options were:
1) keep my RPP and RSP at the plan group administrator where I was no longer an employee (so I wasn't benefiting from a lower MER fee structure)
2) transfer my RPP and RSP to my current employer's group plan
3) transfer my RPP and RSP to a financial institution that I already bank with and already had an investment account with (RPP would be transferred to a LIRA)

I picked option #3. Since I wasn't getting a subsidized rate, there was no real point in me picking option #1 except me not wanting to go through the process of switching. My current employer's group plan (option #2 for me) doesn't have a lot of investment choices so I didn't transfer it there (and I don't believe that my current employer's group plan would cover the transfer/closing fees)

Based on the amount of money we were referring to, with option #3, my financial institution covered the transfer/closing fee of my accounts from the other institution (it was ~$120 for my RPP and ~$120 for my RSP). Choosing option #3, also I increased my investment options over keeping it with option #1 and on top of that, I have a much better user interface/options with my financial institution's investor's website.

I did this in January 2020 and with the market downturn in February/March timeframe due to COVID-19, I just need to make my money back prior to the move but me having moved my money probably wouldn't have affected my "paper" loss amount since I would have probably loss a similar amount keeping it with option #1 even though I changed investments so I don't regret my choice of having moved my money out (and changing my investments).
Sounds very close to my situation. The only difference is that they said there would be no fees for me to transfer out to another institution - possibly my former employee is covering it but will verify the last moment if I do this.
the MER fees will be lower for me at the #1 institution but I doubt they can be close to the ETFs I would buy at the bank.
[OP]
Deal Addict
Sep 13, 2003
1289 posts
116 upvotes
Arrgh wrote: What does your RPP give you? Many company pension plans are professionally managed, so it takes the headache out of you, wanting to manage/invest yourself. But some plans also come with health coverage, or other benefits. If you move it away, you lose all those benefits, unless there are some rules about keeping some in, to still get benefits.

You're asking about LIRA. Does that mean you want to "commute" your pension, take most of it out, while leaving what still needs to be locked in a LIRA? By doing that, you need to manage/invest yourself.

How much, and what's the timeline you have, family to support, financial needs/obligations, and what's your risk tolerance? Do you want to invest all yourself, or have professional do for you? All those are more important, than having account(s) in financial institution 1 or 2 or 3.
Well I'm average at managing my money, most of my personal portfolio is a collection of ETFs following a CPP strategy (90% of my investments or getting to) + some stocks that I hold long.

Currently don't have any health or benefits coverage with either #1 or #2 but will have new coverage with current employer and their group plan administrators.

Yes commuting the pension to an LIRA means I will be self managing it but that's quite easy with the CPP strategy and yearly rebalancing for my entire investing portfolio.

My risk tolerance is better than the average person. I've never sold anything so far when the markets were shedding. Yes to family to support, mortgage, debt but income can support. Never had someone professionally manage my money. Staying with the group plan administrator doesn't mean they are managing my money anyways, at least from my experience so far.
Deal Fanatic
Feb 15, 2006
8937 posts
3458 upvotes
Toronto
Sounds like you're not looking for private wealth management. Some banks (TD, RBC, BMO) offer that, but usually start at $1M. Many in RFD believe they can do better than the professionals so often have derogatory comments on professionals. But Private wealth management is more than just investing, but also estate planning, private banking, and other wealth management.
Deal Addict
Sep 14, 2012
1857 posts
1331 upvotes
Montreal, QC
drey wrote: Sounds very close to my situation. The only difference is that they said there would be no fees for me to transfer out to another institution - possibly my former employee is covering it but will verify the last moment if I do this.
the MER fees will be lower for me at the #1 institution but I doubt they can be close to the ETFs I would buy at the bank.
Another reason that I moved my money from my ex-company RPP and ex-company group RRSP to one of the financial institutions that I deal with was that my financial institution was offering extra money for me to move the money. The amount of money based on how much I transferred and the fact that for my RRSP I was also setting up a monthly purchase plan was supposed to be $500 but they are now saying that it will be $300 since the amount that I transferred from my RPP to LIRA doesn't count.

I told them I will move my LIRA to another institution if they don't reverse their decision but I don't think that it is likely that they will reverse it even though during their promotion, there was no mention that opening up and transferring funds to a LIRA was exempt from the bonus amount. Since the other institution that I was dealing with also told me that they would cover the transfer fee for the amount of money I'm moving, I wouldn't really be losing anything by switching financial institutions especially if I transfer the amount in kind and not in cash this time.
Newbie
Feb 15, 2017
3 posts
1 upvote
I left my job last year and this year finally got notification I was being booted from my former employer's (DCPP) RPP at Sun Life. I didn't mind leaving it there for the year since MER in the company RPP was acceptable. When I received notification of my options: 1-personal account @ Sun; 2-tsf to other RPP if I'd joined one that would accept tsf (I hadn't joined new RPP); 3-tsf to outside institution. My locked in funds would have to go to LIRA and non-locked in funds transferable to RSP.

I found a fairly easy choice to transfer all funds to self-directed LIRA and RSP accounts. I preferred this to leaving funds in a personal Sun account. Even if I'd joined another RPP, I'd prefer my old RPP funds in a self-directed account that allowed me to access a wider range of investment vehicles.
Deal Expert
User avatar
Jan 27, 2004
46775 posts
9876 upvotes
T.O. Lotto Captain
Go with the original group plan if you have no discipline, don’t know what you're doing, or don’t want to learn about investments.

Go to your bank if you know about investments or willing to learn.

Doesnt have to be a genius level investment portfolio. Even just a well thought out collection of ETF’s diversified into various sectors and regions will be good. Then flipping those into more income & blue chip related equities closer to your retirement date.


One thing to think about... does staying in your pension plan give you access to subsidized health & dental plan?

My work offers pension holders group health & dental. As of today the cost of this health & dental is $100/month. $1200/yr... which isnt bad knowing your health, meds and dental is covered...

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