Survivor Benefits - Employer Pensions

Death Before Retirement

If you die before you retire, most plans allow your spouse to receive either a monthly benefit from your pension or a lump sum amount. Check your employer’s  plan for the specific details.

If you are single, most plans allow for a lump sum transfer to listed beneficiaries or your estate. Keep in mind that your beneficiaries or estate will receive the after-tax amount of the pension monies (that is, if the plan is deregistered, pension monies are taxed).

What About Survivor Benefits?

All pension plans are designed to produce income for the life of the retiree and for the life of a spouse or qualified partner, as of the employee’s retirement date. If you have an eligible pension partner, government regulation usually requires a joint and last survivor benefit of 60%. This means that you receive 100% of the initial amount for your life, reducing to 60% for your partner, if you should die first.

Check with your employer regarding the normal and any optional forms that may be available, which could include:

  • For single employees:
    • Single life
    • Single with a guarantee period of five, ten, or fifteen years
  • For employees with partners/spouses:
    • Joint and last survivor: 50%, 60%, 66%, 75%, 100%
    • Guarantee periods (in case both partners die prematurely) of five, ten, or fifteen years

LIFS, RLIFS, LRIFS and Prescribed RRIFs

Upon your death, your named beneficiary(s) will receive the remaining value of your account after your estate pays the taxes (only a spouse/partner may receive the account on a tax-sheltered basis). Traditionally, if you have a spouse/partner, you were required to name this person as your beneficiary. Some provinces now allow a non-spouse beneficiary to be named (with the spouse’s written consent).

Only a spouse/partner may receive the account on a tax-sheltered basis. For any other beneficiary receiving the funds, the full value would be considered to be de-registered and your estate would pay tax on it. There are special provisions for dependent children and grandchildren.

Alternatively, your spouse may sign a waiver relinquishing his/her rights to an income. Independent legal advice is recommended. Similarly, spouses must also sign off in agreement for you to purchase a retirement income vehicle other than an annuity. The exact details will depend upon the jurisdiction that governs the original pension plan.

Survivor Benefits - Employer Pensions

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