As retirement approaches, it’s important to have a solid understanding of the different types of pension plans available in Canada. A pension plan is designed to provide income for individuals during retirement and can be a crucial source of financial stability. There are three main types of pension plans in Canada: government-sponsored plans, employer-sponsored plans, and personal savings plans.
Government-sponsored pension plans include the Canadian Pension Plan (CPP) and the Old Age Security (OAS) program. These plans are funded by mandatory contributions from employees and employers, and provide a basic level of retirement income. The amount received from these plans is determined by a formula that takes into account an individual’s contributions and years of work in Canada.
Employer-sponsored pension plans, also known as workplace pension plans, are offered by some employers as a benefit to their employees. These plans can be defined benefit, where the employer guarantees a certain level of retirement income, or defined contribution, where the employer and employee make contributions to the plan and the retirement income is based on the investment performance of the contributions.
Lastly, personal savings plans, such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs), are also an important part of retirement planning in Canada. These plans allow individuals to contribute a portion of their income on a tax-deferred basis and withdraw
