If you are a recently laid off employee at Ford Motors in Canada, losing your job is daunting, but knowing your options and having the right guidance can make it easier to take your next steps. With options ranging from a standard company pension to more complex solutions such as a follower annuity, you can be sure you’re making an informed choice that best suits your financial needs and future goals.
Understanding Ford’s retirement plan
When employees retire or leave Ford Motors, they are typically presented with a retirement statement that presents several options:
AND. Company pension
Choose a fixed monthly payment from Ford for life. If you have a spouse or partner, they will be entitled to a reduced continuation pension after your death.
B Commutated value option
This option allows you to withdraw your pension. Generally, you can transfer your lump sum pension amount to another financial institution and manage it, preferably with the help of a financial advisor from Pension Solutions Canada, to optimize your tax benefits. Watch out for a possible tax break. Connect with us to discuss.
C Lifetime copy
An interesting third choice is a copycat annuity, which is a replica of a company pension but comes from another financial institution such as Canada Life or Sun Life. The value you withdraw into your pension is transferred to these institutions, ensuring that you receive the same pension amount without having to link it to Ford.
D +1: Delay in pension payment
This option allows you to postpone the start of your pension, resulting in a higher monthly payment once you start drawing from it. It is important to assess whether waiting makes financial sense, taking into account your age, debt, your spouse’s or partner’s income and whether you will be working?
Following the path of imitative rent
Let’s share with you an example of a client we recently worked with at Pension Solutions Canada. A former Ford employee came to us and preferred the stability of his pension, but for personal reasons he wanted to disconnect it from Ford. Solution? He decided on a follower pension. In many cases, insurers such as Sun Life or Canada Life are willing to assume pension liability for less than the amount converted, giving YOU the excess cash.
Example: Let’s assume your pension is worth $750,000. Once this amount is presented to Sun Life or Canada Life, their actuaries may determine that they only need $700,000 to provide the same pension payment. This leaves surplus an amount of $50,000 that can ideally be invested in an RRSP or tucked into your jeans (after taxes).
Get expert advice
Before making any decisions, it’s a good idea to consult with experts like Bruce Youngblood of Pension Solutions Canada. Not only can we walk you through the ins and outs of these options, but we can also support the entire process, ensuring your interests are protected every step of the way.
Want to dive deeper? click here and schedule a free 15-minute Zoom call to discuss your unique situation.
