McGill University Pension Plan Settlement Options Information Session

Transcription

1 The presentation can be accessed in online at: McGill University Pension Plan Settlement Options Information Session

2 2 This presentation is intended to inform you about the McGill Pension Plan & the importance of integrating pension investment decisions to your financial management. This is not financial advice & should not be taken as such. It is meant to alert you to the matters to look into. Your individual needs & circumstances may not be adequately addressed by the info contained in this presentation.

3

4 4 Types of Pension Plans Defined Benefit Pension is based on a formula tied to service & salary Defined Contribution Pension is based on contributions, the investment return accumulated at retirement as well as market conditions

5 5 McGill University Pension Plan Defined Contribution (Part B) Hybrid (Part A) Applies to members who became eligible to join on or after January 1, 2009 Referred to as Part B of MUPP Applies to members who joined prior to January 1, 2009 Defined Contribution + Defined Benefit = Hybrid Referred to as Part A of MUPP

6 Account Access Login to the McGill University Savings Program (Morneau Shepell) website: login using your McGill username & password 6 View Account balances, included defined benefit (Part A), personal & fund rates of return Use Retirement Income Calculator etc. If you forget your username or password, contact the IT Customer Support Help Desk at or for assistance.

7 7

8 8 Market Value of DC pension holdings Value of GRSP holdings (AVCs and RSPs are excl. from DBM calc.)

9 9 DBM accrued to current date but payable at NRD Transfer value of the DBM Estimated DBM Supplement

10 Defined Benefit (DB)Minimum Supplement = transfer value relative performance of the Balanced Account (Part A hybrid only) 10 If not in Defined Benefit supplement position at cessation, DB minimum ends Subject to: Maximum DB Limit Maximum Transfer Limit part or all of payment may be subject to taxation Member contributions if > 50% of DB pension value will be refunded at the time of settlement

11 Retirement Income Calculator available online! 11

12 12

13 13 Retirement vs. Settlement You can retire from the University without having to settle your MUPP holdings = defer settlement Ability to settle MUPP holdings: Earliest of termination, retirement or the month following the one in which you turn 65 or Latest: December 31 st of the year in which you turn 71.

14 How do I request settlement? 14 New Retirement/Termination: Statement and settlement package forwarded to you following notification (Notice of Status Change or Notice of Termination issued by your department) and final pension contribution remittance. Previous Retirement/Termination or Members > Age 65: Contact the Call Centre for the McGill University Savings Programs at to request a settlement package. Settlement transactions: valued on 15 th or last business day of the month.

15 Processing Sample: No Lag Retirement Date April 30, April May June 15 June 30, 2015 Receive payment < $100,000 (regular mail) June 25, 2015 Receive payme > $100,000 (courier) Interface with MS (contributions & status changes) Processing of Contributions by MS Account values determined by MS Settlement Package sent to Member Settlement Package received by Member Completion/Return of forms to MS by Member Settlement Processing Payment file sent to custodian (CIBC) Payments made by custodian May 12 May 15 May 19 May 20 May 22 May 25 May 26 May 28 May 29 Jun 12 Jun 15 Jun 17 Jun 19 Jun 23

16 A brief overview of settlement options. For more information, please sign up for a Settlement Option Information Session. 16

17 17 Can I cash out my pension plan? Subject to locking in provisions! Lump Sum Cash Payment is available if: a) Value < 20% of YMPE in year or termination, or b) If over age 65 and total value in DC, LIF, LIRA < 40% of YMPE, or c) Non Resident (Canada) for at least 2 years.

18 18 Settlement Options Purchase an external annuity Defer Settlement (latest age 71) MUPP Combo annuity & LIF/LIRA Group LIF LIRA or LIF LIRA: locked in retirement account LIF: life income fund

19 19 What is a retirement income? Variable income streams Life Income Funds (LIF) Registered Retirement Income Funds (RRIF) Pension income streams QPP + other Gov t programs Annuities Defined benefit pensions Variable income streams with guarantees

20 Income options 20 Registered Retirement Savings Plan (RRSP) & nonrestricted AVCs Registered Retirement Income Fund (RIF) Locked In Funds Locked In Retirement Account (LIRA) Registered Pension Plan (RPP) & restricted AVCs Life Income Fund (LIF) and/or Annuity

21

22 22 What is an annuity? Exchange fixed amount of $ for a future stream of payments Income amount is fixed at onset Offers protection from outliving capital

23 23 Features of annuities Single Life Annuity Highest Payments Payments cease upon death Joint & Last Survivor Annuity Payments continue to surviving spouse >= 60% of payment to continue unless spouse waives entitlement Guaranteed Period: 5 15 years Indexation

24 24 Income security What does it cost to buy a pension of $38,000 per year? A. $650,000 B. $600,000 C. $680,000 D. age 65 female, annuity rate 0.5% age 65 age 60 age 60 age 60 survivor pension 60%

25 Annuities MALE (monthly payment (life only annuity) based on a premium of $500,000 of registered age 65 25

26 Age: 65 Single Life 26

27 27 Impact of indexation Gender 0% 2% 3% 4% FEMALE $1248 $998 $875 $761 MALE $1,390 $1,125 $1,002 $896 Assumptions: $250,000, 65 year old, life only annuity, no guarantee Source: CANNEX December 31, 2016 this information is current as of the date posted and is subject to change.

28 28

29 Assuris 29 Not for profit organization that protects Canadian policyholders Founded in Canadian citizens or residents Transfer of policy to a solvent company in case of failure/bankruptcy Annuities insured up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher Every life insurance company is required to become a member

30

31 31 What is a Life Income Fund (LIF)? Subject to minimum and maximum annual withdrawal limits You assume the investment risk You decide how account is to be invested Rate of return is dependent on investment selection May convert to an annuity

32 32 LIF Annual MIN/MAX withdrawal % January 1, 2018 Age MIN MAX Age MIN MAX Age MIN MAX

33 LIF Calculator: 33

34 34

35 35

36 LIF & Annuity Annual Income Streams $25,000 Assumptions: Initial Value of Account: $250,000 ROR on Investments: 4.5% Start Age: 60 (at beginning of year) CANNEX commissioned quotes (Life Only annuity) 36 $20,000 Minimum Payment Stream Maximum Payment Stream $15,000 Annuity Payment (female) Indexed Annuity Payment (2% Female) $10,000 Annuity Payment (male) $5,000 $

37 37 What happens to my LIF/RIF when I die? Balance of LIF is no longer locked in Annuitant is considered to have received, immediately before death, the value of the account and income is reported unless spouse or common law partner is successor annuitant Your spouse, or your beneficiary if you do not have a spouse, will receive the funds Qualified Beneficiary may transfer funds to RRSP, RRIF, annuity subject to conditions

38 38 LIF/LIRA Plan Types Self directed Full service brokerage account Financial institution/insurance company Discretionary Management Account Money Management Firms Management Expense Ratio (MER)

39

40 Group LIF/RIF Open to MUPP: Active Members (over age 65) and Inactive Members (55 or more) who have yet to settle. 40 Retired and/or terminated members who recently transferred out to LIF/RIF with a financial institution and whose funds continue to be administered under Quebec legislation Low investment management fees Access to RIF for non locked in holdings Easy to use website Ability to transfer in external RIFs/LIFs

41 Investment Options Group LIF/RIF 41 Equity Pool TD Asset Management Canadian Equity (30%) US Equity (40%) Non North American Equity (30%) Fixed Income Pool Philips, Hager & North (PH&N) Bond Fund (100%) Money Market Pool TD Asset Management Risk Target Balanced Options

42 Fees Group LIF/RIF Low investment management fees: range of 0.20% 0.30% Management Expense Ratio (MER) Initial age 65 Estimated Management Fees (in today s $ over 25 years 0.25% $250,000 $ 6, % $250,000 $25, % $250,000 $38, % $250,000 $50, % $250,000 $63, For illustrative purposes only. Assumes 5.5% net rate of return and max LIF payment stream. Other Fees: Record Keeping Fee: $51.59/annual (2018) for each LIF and/or RIF account. Includes tax and is subject to an annual indexation. Cheque Issuance Fee: $10/per lump sum payment

43 43 Other preferential arrangements LIF & annuities Sun Life Financial between 8:00 a.m. and 8:00 p.m EST every business day Website: For more information:

44 Summary of income options 44 Annuity LIF Potential to Grow or Lose Value Fixed Income Flexible Payments Convertibility Control of Investments Inflation Protection if indexed Estate Preservation Limited to remaining guaranteed payments

45 Your investment responsibility 45 Understand the decisions that you need to make and select investment option(s) which are right for you. Review your investment portfolio & investment strategy Seek independent investment tax advice

46 46 New Session Decumulation Topics include: The risks associated with the payout phase of retirement Cash flow, inflation & purchasing power, rates of return, longevity The settlement options available How to review your investment strategy What are your sources of income during retirement and which should be withdrawn first ***Highly recommended that you have previously attended a Settlement Options or Retirement Information Session To Register:

47 Other information sessions 47 Session Dates (until May 2018) General Jan 29, Feb 26, Mar 26, Apr 30, May 28 Retirement Jan 30, Feb 27, Mar 27, May 1, May 29 NEW Decumulation Jan 8, Feb 5, Apr 9 Group RSP Jan 11 Dates, times, locations & registration tool on our web site: McGill University Retirees Association: arum.association.mcgill.ca/