Leaving Company with DC and DB pension - info on LIRAs / other advice

[sabad66]

I resigned from my current work place where i have a DB and DC component of pension. I joined the DB plan Jan 1 this year and my last day here will be in mid June, so i would have only been on the DB plan for 6.5 months and thus will be a relatively small amount.

New company has a DC/DB as well (although i won't be on the DB right away), but in the info package they clearly state that i can't transfer my current DC into the new company's DC.

So my options for what to do with the DC are:
1. Leave it in the current company's plan, currently managed by Sun Life. I assume i could still use my old company's funds choices (they are actually pretty good with low fees)
2. Transfer to Sun Life Group Choices Plan. Need to look up details on this
3. Transfer DC balance to another financial institution. I assume this is only if the new company allows transfers into the DC which mine DOES NOT.
4. Transfer DC balance to a LIRA

I'm leaning towards option 4 to put into a LIRA, but i'm trying to figure out what exactly i can do in a LIRA. Can I open a LIRA that is essentially a full trading account where i can buy/sell equities? Or does it have to be a "limited" type of account where i can only buy certain lower risk funds? I certainly won't be very risky in this account compared to my other investment accounts, so if i can buy normal equities, I probably will end up just buying some Vanguard ETFs. I bank with BMO so i would be looking to open a LIRA with them most likely in case that matters.

Anyone else gone through something like this recently and can comment on what you did and your thought process? Are there any major differences between which FI i choose to open the LIRA?

[FishPoo]

Did the same thing and transferred DC to a LIRA at my own financial institution. It works and operates like any of my other investing accounts. I don't think you'll see much difference between banks besides commissions and interface. I don't believe there are any restrictions on what you can hold in a LIRA.

I moved it into my own lira to consolidate everything, much easier to manage when it's all in one place. If you move jobs every few years and each company sets you up a rrsp and DC pension at a different institution it becomes a pain to keep track of them all.

[cdnsir]

You can do whatever you want in LIRA, buy the index or YOLO into options, it's your call.

When I moved mine, I transferred from Manulife's funds as cash into Questrade. There's a specific form you need to fill out, and that's about it.

[skandalouz_08]

You can transfer to a LIRA and then invest as you wish with basically no restrictions at any financial institution.

If you stay with the company plan you will get low fees but restricted to what investments the company offers. Group Choices plan is just an extension of the company plan but fees tend to be a little higher than the company plan.

Side note, your DB plan should be able to be transferred to an RSP under the small balance unlocking rules. Might want to look that up if you aren't aware of this.

[suntan]

You will want to move them out into a LIRA. Check the fine print, I'm fairly sure SL will kill you on fees if you stay there. You also don't get the cheap funds anymore, they'll move you to the ultra-high MER ones.

You might have two LIRAs because the company you worked for has a federal and provincial savings component (yeah, it's REALLY stupid).

[flipstah]

I'm on Group Choices LIRA for my SunLife account and the fees are 1.3-1.7% per type of investment you make; if your average balance is more than 75k the fee lowers to 0.05% max per investment. The higher your balance the greater the reductions are.

If you go to Group Choices LIRA and then switch to Questrade, you have to check if these fees apply to you:



Some things that happened to me:

- Old company and new company are SunLife but I couldn't transfer the LIRA into my current company DC or RRSP. Has to be separate accounts.
- My old company gave me the option to switch to any LIRA but couldn't cash the DC out; if you cash out I think you have to put it into another account (it's been a while)

[mr2mike]

Nothing else to add except they're all telling the truth.

[littledan]

I turned my db/dc plan into a lira worth 88k, built it to 110k, and subsequently unbuilt it to about 75k. #winning

[sr5ae92]

OP I was in the same scenario as yourself back in Feb this year. Moved my tier 3 dc balance to a LIRA in my financial institution, because they offered lower fees than with Sunlife; the latter recently raised their rates in Apr.

Since you are leaving your company, I don't think you will be eligible for discounted group rates/fees with Sunlife (your option 1). Don't know about you, but I had vested and non-vested amounts in my pension plan.

The non-vested had to be cashed out or put into a rsp, fortunately I had lots of room in my rrsp; thats something you need to consider if it applies. You can open a LIRA with any financial institution, but would make

sense to keep it in your primary institute. Since your overall assets there would increase, you might be eligible for lower account fees and preferred services.

[sabad66]

Thx for the info everyone. Regarding option 1, i was surprised that it was an option too but it's definitely there. Here's a snip from my resignation package:


If i go with that option, i won't be able to add any more money to it, but i can keep the existing $ in there and buy/sell funds any time in the future. The benefit would be that i get access to buy their low-fee funds. Here are the fund fees:


Are these really that good or am I over-rating how "good" these are in terms of fees? For reference i looked up VGRO and their management fee is 0.22% so its not really that far off.

[sabad66]

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You can transfer to a LIRA and then invest as you wish with basically no restrictions at any financial institution.

If you stay with the company plan you will get low fees but restricted to what investments the company offers. Group Choices plan is just an extension of the company plan but fees tend to be a little higher than the company plan.

Side note, your DB plan should be able to be transferred to an RSP under the small balance unlocking rules. Might want to look that up if you aren't aware of this.

Interesting idea about transferring DB into an RSP. It doesn't list it as an option but i will definitely look into it more once i know how much the DB piece is going to be worth. Do you know if it would count as a contribution i.e. would it translate into a tax credit?

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I'm on Group Choices LIRA for my SunLife account and the fees are 1.3-1.7% per type of investment you make; if your average balance is more than 75k the fee lowers to 0.05% max per investment. The higher your balance the greater the reductions are.

If you go to Group Choices LIRA and then switch to Questrade, you have to check if these fees apply to you:



Some things that happened to me:

- Old company and new company are SunLife but I couldn't transfer the LIRA into my current company DC or RRSP. Has to be separate accounts.
- My old company gave me the option to switch to any LIRA but couldn't cash the DC out; if you cash out I think you have to put it into another account (it's been a while)

1.3% seems crazy high! But then 0.05% seems crazy low. Are you sure the management fees of the funds go down to 0.05% with a balance over 75k?

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I turned my db/dc plan into a lira worth 88k, built it to 110k, and subsequently unbuilt it to about 75k. #winning

what you did is exactly what i don't want to do lol, which is why i'm seriously considering not doing a LIRA just for the basic fact that i simply can't gamble with individual stocks and have to stick with these safer funds.

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OP I was in the same scenario as yourself back in Feb this year. Moved my tier 3 dc balance to a LIRA in my financial institution, because they offered lower fees than with Sunlife; the latter recently raised their rates in Apr.

Since you are leaving your company, I don't think you will be eligible for discounted group rates/fees with Sunlife (your option 1). Don't know about you, but I had vested and non-vested amounts in my pension plan.

The non-vested had to be cashed out or put into a rsp, fortunately I had lots of room in my rrsp; thats something you need to consider if it applies. You can open a LIRA with any financial institution, but would make

sense to keep it in your primary institute. Since your overall assets there would increase, you might be eligible for lower account fees and preferred services.

Ah good point, i might be able to save my yearly RRSP/RESP fees if i bring over this massive balance to them into a new LIRA.

[flipstah]

If your balance is greater than 75k, the fee lowers from 1.3-1.7 to a floor of 0.05%

So could between 0.05% -1.3%

I’lltake a screenshot tomorrow for you!

If you can’t add to it that’s essentially a company LIRA

[suntan]

Vanguard has been lowering their MERs for a while now, you're probably better of moving.

Very pleased to see though that they don't gouge you for leaving your money with them anymore. We had to deal with my wife's pension basically immediately because they were going to MER and fee the hell out of her money.