Transfer Value... buying an annuity?

[Brad Sallows]

There are survivor benefits, but my point stands.

The value of an estate is often overlooked. A defined benefit pension is a bet that you're going to live long enough to at least collect whatever you paid in. Other hand: a pension fully-indexed to inflation is pretty much unprice-able. I prefer that my retirement lump is mine, to consume or pass on as I choose.

One simple analysis is to take your preferred retirement age and income and plug them into a calculator that will tell you how much an annuity would cost to buy when you retire. Another is to just plug numbers into a spreadsheet to start with a lump at retirement which gains some average % net-of-inflation each year and from which you withdraw your income amount each year (taking care to also increase that amount by average inflation).

Either way, I suspect most people would be alarmingly surprised at the lump of money needed. I keep coming across people who think they're going to be doing well with $250K in savings when they retire. A side-effect is that people with DB pensions - and especially indexed ones - don't understand the full value of their compensation when they're comparing only take-home pay with their un-pensioned (mainly private sector) counterparts.

 

[dapaterson]

For the federal public service, contribution rates are set to land at (approximately) 50/50 split between employee and employer. The more generous CAF (full time) pension plan sees the GoC put in about $1.70 for ever $1 of member contributions , and about $2.40 per every $1 in the Res F plan (OSFI actuarial report as at 31 Mar 2019, https://www.osfi-bsif.gc.ca/sites/d...studies/canadian-forces/2020-11/en/CFSA19.pdf) For the RCMP, GoC pays about $1.20 for each dollar of member contributions (OSFI actuarial report as at 31 Mar 2021, Actuarial Report on the Pension Plan for the Royal Canadian Mounted Police as at 31 March 2021 - Office of the Superintendent of Financial Institutions)