Defined benefit plans 101

What is a defined benefit plan and why is it valuable?

It’s called a defined benefit plan because it’s based on a pre-set formula that defines the benefit you’ll receive when you retire. A defined benefit plan provides you with a pension that’s payable for your lifetime, so you don’t need to worry about outliving your money in retirement.

What are the benefits?

  • Security – Because your pension is based on a pre-set formula, you’ll know with a fair degree of accuracy what your monthly pension will be, so you can plan for living in retirement.
     
  • Peace of mind – Your pension is payable for life and it’s 100% backed by the Government of Ontario.
     
  • Investment expertise – One of the greatest benefits of being a member of the PSPP is that the investing is done on your behalf. The PSPP Fund is managed by a team of highly skilled investment specialists who make strategic investment decisions to help generate the returns needed to fund your pension.
     
  • Inflation protection – Your PSPP pension is indexed to annual inflation to make sure you maintain your purchasing power throughout retirement.
     
  • Early retirement – Normal retirement in the PSPP is age 65, but you can retire early from the PSPP with an unreduced pension if your age and pension credit equals 90 points (Factor 90), or if you're at least 60 years old and have 20 years or more of pension credit (60/20).
     
  • Survivor benefits – Making sure your loved ones are well taken care of is important. The PSPP includes provisions to help provide for your eligible spouse and eligible children after your death.
  • Disability – Planning for the unexpected is an important part of life, so that’s why the PSPP provides a disability pension to eligible members.
  • Advisory Services – Through Advisory Services, you have full access to our qualified advisors who hold Certified Financial Planner® (CFP) designations. Our advisors can help you understand how your pension fits within your overall financial picture. They will take the time to understand your personal financial situation and your goals, so you can make the most informed decision.