Registered Pension Plans

There are 2 basic kinds of plans: defined benefit plans and defined contribution plans.

• Defined benefit plan – pension plan that guarantees employees a specific monthly benefit at retirement. Members receive a level of retirement income based on a calculation that typically factors in years of service with the employer and salary earned. Contributions are made during the member’s time as an employee. Employer and member contributions are pooled in a pension fund and invested. The pension plan sponsor (the employer) is responsible for ensuring that the plan can pay members the required retirement income.
• Defined contribution plan – allow companies to sponsor plans without bearing the investment risk that comes with a defined benefit plan. Each member has his or her own account. Employer and member contributions are invested, usually based on investment options selected by the member. Your retirement income is determined by how your investments perform. The employer’s contributions are a tax-deductible expense and are not a taxable benefit to the plan member.