We've become accustomed to hearing terms like merger, buyout, acquisition and downsizing. People are changing jobs more frequently, either by their own decision or by the powers of the ever-changing corporate environment. Over the past fifteen years Canadians have become accepting of job changes. The average duration at any job is now five years. Often when a person changes their job, decisions must be made regarding any pension benefits that have accrued. An increasingly important concern for many is the flexibility and portability of their pension plan.

Frequently employees are choosing to take the lump sum and waive the guarantees of the corporate-sponsored pension plan. The result is that the responsibility of pension fund management is shifting from the employer and insurance company to the employee.

The decision to transfer your pension value should not be taken lightly. There are a few key assumptions that one must make when analyzing the pros and cons of taking a lump sum versus keeping the pension. You should understand that there is an element of investment management involved. Determine your comfort level with managing your own money and decide if you will do it yourself or seek the assistance of a professional.

You will want to estimate a realistic rate of return on the lump sum. Then decide if the projected growth will provide an income that will exceed the projected pension benefit. There may be other benefits, such as health and life insurance plans that will disappear when the pension is transferred.

If you take the lump sum, you will probably transfer the pension value to a Locked-In Retirement Account (LIRA). You should know the rules that apply to a LIRA. Pensions that fall under the locked-in rules have many restrictions regarding the amount and timing of future retirement income.

This pension decision has the potential to enhance your future retirement income, but you may also be passing up the opportunity of a lifetime. Seek the advice of a professional. You won't regret it.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.