wealth_retirement

Generally, an employee might find it advantageous to receive the commuted value of his/her pension in circumstances where:

there is more than 7 years from the date at which they are entitled to receive pension income (future pension incomes are frozen and not linked to inflation during this period)
the pension does not offer inflation protection
where there is a shorter than average life-expectancy
where the employee is not married (no opportunity for joint pension options) and wishes to preserve estate value
where there is a concern about the long-term financial viability/management of the pension plan and/or the employer (or industry)
where there is a risk/likelihood that related benefits will be reduced

Advantages of opting-out:

greater control over the management of retirement assets
ability to tailor one’s retirement investment strategy to suit specific goals and horizons (rather than the needs of many)
wider range of investment opportunities and potential for more robust returns
advantaged LIF minimum rules for Provincially legislated plans
reduced exposure to employer specific risks including underfunding, bankruptcy
in the case of Defined Benefit Pension Plans, the ability to maximize the commuted value during a period of low interest rates
estate planning benefits including tax-free rollover to a surviving spouse (or eligible dependent) and rollover of all remaining assets to other beneficiaries
opportunity to augment pension security and estate goals with life insurance solutions
potential for employer “incentive”

Disadvantages:

in the case of opting out of a Defined Benefit Plan, the employee will be directly exposed to investment risks and portfolio variability
the cost of “institutional” money management may be lower
in the case of a DB Plan, the ability to choose from several pension income options including a Joint, Last Survivor Pension will be lost
in the case of a Defined Benefit Plan, the employee may forego inflation adjustments (where available)