Submitted by: Glen Izzard, CIM; Investment Advisor, Portfolio Manager
Imagine you’re standing at a train station.
One track offers a guaranteed ride to your destination. The other hands you the keys and says, “You drive.” Neither choice is automatically right or wrong. But choosing the wrong one for your situation could have a significant impact on your retirement.
This is the decision many Canadians face when they leave an employer that offers a defined benefit pension plan. At that point, they are often presented with two options: leave the pension where it is and receive a guaranteed monthly income later in retirement, or “commute” the pension and transfer its value into a locked-in investment account that they manage themselves.
The question is not simply, “Should I take the money?”
The more important question is: “What is this pension designed to do for me, and can I realistically replace it on my own?”
According to pension regulators, a commuted value represents the lump-sum value today of the future monthly pension payments you would otherwise receive throughout retirement. Once the transfer is completed, the decision is generally irreversible.
Before making a decision, consider these three important questions.
One of the biggest advantages of commuting a pension is flexibility.
The transferred funds can be invested according to your personal goals, risk tolerance, and retirement timeline. For disciplined investors, this may create opportunities to customize investment strategies and potentially leave a larger estate for beneficiaries.
In some situations, receiving a portion of the commuted value as taxable cash may also provide funds that could be used to reduce outstanding debt or strengthen other areas of a financial plan.
However, flexibility comes with responsibility. Once the pension is transferred, you become responsible for investment decisions, income planning, and ensuring the money lasts throughout retirement.
When a pension remains in the plan, the pension administrator assumes the investment risk.
When you commute to the pension, that responsibility shifts to you. Market downturns, poor investment decisions, higher fees, or withdrawing too much too soon can affect the income available later in life.
Many defined benefit pensions provide something increasingly rare: predictable income for life. Some also include survivor benefits and inflation adjustments that help protect purchasing power over time.
A commuted value may offer greater growth potential, but there is no guarantee the investments will generate the same lifetime income that the pension was originally designed to provide.
This may be the most important question of all.
Some people sleep better knowing a pension cheque will arrive every month regardless of what the markets are doing. Others prefer having control over their investments and the ability to make decisions as circumstances change.
Neither approach is inherently better.
The right choice depends on your financial discipline, retirement goals, health considerations, family situation, and comfort with investment risk.
Your Three-Point Pension Checklist
Before deciding whether to commute a pension, ask yourself:
- Do I understand exactly what benefits I am giving up?
- Do I have a disciplined long-term investment strategy?
- Have I received professional advice that considers my entire financial picture?
Retirement planning is not about accumulating the largest number on a statement. It’s about creating reliable income, maintaining flexibility where appropriate, and having confidence in your future.
If you’re facing a pension decision, don’t focus solely on the size of the lump sum. Focus on what that pension is designed to deliver. Sometimes the most valuable asset isn’t the money itself. It’s the certainty that comes with it.
If you have a pension through a current or former employer, take 15 minutes this week to review your pension statement and understand your available options. The decisions you make today could influence your retirement for decades to come.
A simple conversation today with a qualified financial advisor could help bring clarity, direction, and peace of mind for the years ahead. I am always available for a conversation.
About Glen Izzard
Based in Meaford, Ontario, Glen Izzard is a Chartered Investment Manager (CIM®) and Discretionary Portfolio Manager with over 15 years of experience helping clients navigate investing, cash flow, estate planning, and retirement transitions.
Known for his client-first approach, Glen focuses on building clarity, confidence, and long-term results. An active community supporter, he serves as treasurer for the Meaford Chamber of Commerce and as assistant coach with Georgian Bay Lightning Hockey. Glen’s mission is simple: provide thoughtful guidance, practical strategies, and a steady hand so clients can stay on course — financially and in life.
Please contact: (905) 407-4500 glen.izzard@owm.com www.greenpeaksecurities.ca
This material is provided for informational purposes only and is not intended to provide legal, tax, or financial planning advice by Optimize Wealth Management. Always consult a licensed professional before making decisions regarding your personal financial circumstances or estate plan.
