Watch the video guide

Prefer watching? Here is the LifeMoney explanation of this topic.

Open this video on YouTube

Pension lump sum or monthly pension: what are the choices?

Quick Answer

Keeping a defined benefit pension means receiving monthly income under the plan’s terms. A commuted value is a lump sum that may be transferred instead, if eligible. Your plan’s current options statement and election deadline establish what is open to you. Compare the benefits, tax and household income before deciding.

A guide to your next conversation

Your pension decision, one step at a time

Organise what to ask about your workplace pension. This guide does not choose an option for you. Your plan's current options statement and administrator establish what is available in your situation.

Everything is open below. Choose a stage to jump to it, or keep reading.

Stage 1 · Preparing to leave

Start with the plan you actually belong to. Find its name and administrator on your statement, and ask whether your benefits are defined benefit, defined contribution or a combination. This guide focuses on a defined benefit pension.

  • Request your current options statement. Ask when it will arrive and what you need to do if your departure date changes.
  • Ask which choices are available: keeping a future pension, starting a pension when eligible, or a permitted transfer. Do not assume leaving a job makes every transfer route available.
  • Ask who confirms eligibility and deadlines. Your plan administrator can explain the options in your statement; a retirement conversation can help you frame the household questions.

For background on your plan, read our HOOPP leaving-employment guide, OTPP leaving-teaching guide or OMERS leaving-employment guide. Confirm current terms directly with your administrator.

Next: comparing my options →

Stage 2 · Comparing my options

Put the actual plan pension beside the arrangements you are permitted to use. Keep two dates separate: your election deadline and the date your quotation expires or must be recalculated. Ask the administrator to confirm both, including what happens if you do nothing. There is no single deadline or transfer age that fits every plan.

Use these questions to compare keeping your plan pension with an eligible transfer to a Locked-In Retirement Account (LIRA) or Life Income Fund (LIF). Other permitted routes, such as another pension plan or an annuity, may work differently and need their own comparison.

What income is payable, and when?

Keeping the plan pension
Ask for your pension estimate at your intended start date, any early-start reduction and any temporary bridge payment. Which amounts continue for life?
Eligible transfer to a LIRA / LIF
Ask what income the permitted arrangement could provide, from what date, and under what return, inflation, fee and longevity assumptions. Which payments, if any, would be guaranteed by a contract?

Who manages investments, pays fees and bears risk?

Keeping the plan pension
Ask how the plan funds its pension promise, who manages its assets and what plan risks or funding restrictions matter to your benefits.
Eligible transfer to a LIRA / LIF
Ask who will make investment and withdrawal decisions, what all fees cost, and how your income would respond to losses or a longer retirement.

Which indexing, survivor and other benefits apply?

Keeping the plan pension
Request your actual indexing rules, spouse or survivor options, guarantee periods and any other benefits. Which are conditional, and which are guaranteed?
Eligible transfer to a LIRA / LIF
Ask which plan benefits you would give up, what protection a replacement arrangement includes, and which spouse or beneficiary rules apply.

What access, transfer and tax restrictions apply?

Keeping the plan pension
Ask what choices remain while benefits stay in the plan, what election dates apply and how pension payments will be taxed.
Eligible transfer to a LIRA / LIF
Ask for the permitted destinations, locked-in restrictions, tax-deferred transfer limit, any taxable portion and any payment restrictions. Is a LIF available at your age?

Prepare questions about tax, fees and your household's income needs before signing. What would cover essential spending if investments fell? How would a surviving partner's income change? What role would other retirement savings play if you keep the pension?

Gather the checklist ↓

Stage 3 · My decision is made

If you are keeping your pension

Ask the administrator to confirm your recorded choice, what forms are needed now or when payments begin, and how to keep contact and beneficiary details current. Keep the confirmation with your records. You can still plan how other savings fit around that pension.

Continue with retirement income sources in Canada to prepare your wider income questions.

If you are transferring

Confirm the election, permitted receiving arrangement, direct-transfer paperwork, taxable portion and expected payment timing with the administrator and receiving institution. Ask what benefits end and when. Do not assume an election or completed transfer can be reversed.

Once the permitted route is confirmed, read questions about investing a commuted value in a LIRA. Keep copies of the administrator's and receiving institution's confirmations privately.

Your printable pension conversation checklist

Use your browser's Print command to print this guide or save it as a PDF. No signup is needed. Optional ticks are for this page only; this guide does not save or send them.

Gather documents privately. Do not upload or type pension documents, account IDs, balances or medical information here. Write any personal notes on your own copy.

Key Takeaways

  • 1Confirm your available choices with the plan administrator.
  • 2Keep the election deadline separate from quotation expiry.
  • 3Separate the tax-sheltered transfer from taxable cash.
  • 4Compare lifetime income, temporary payments and survivor benefits.

What a commuted value (the lump sum) tells you

A commuted value expresses future pension income as a lump sum today. It is not simply a refund of contributions or spendable cash. The administrator calculates it using actuarial standards, as FSRA's commuted-value guide explains.

Use the quotation to open a comparison, not finish one. Ask for the pension at your intended start date, separating payments that last for life from those that end or change.

Confirm the choices and deadlines before comparing amounts

This is general information about defined benefit pensions; the locked-in rules below are Ontario's. Ask your administrator which pension jurisdiction applies.

Leaving may allow a future pension, an eligible early pension or a permitted transfer. FSRA says the written statement sets out benefits, options and election deadlines. Confirm quotation expiry separately, which forms must arrive and what happens if you do nothing.

Estimate a lump sum and the taxed part

This gives a rough range from your statement figures and the plan rules you enter, and checks a lump-sum figure your plan has already sent. Nothing you type is saved or sent; your plan's statement figure always wins. If your plan has its own page in the list below, use the calculator or statement check there.

Pension lump sum estimate and statement check

A rough range for the lump sum (commuted value) your plan may offer if you leave, how much of it could stay tax-sheltered, and how much would be taxed. Your plan’s own figure always wins.

Nothing you type here leaves this page: it is not saved or sent anywhere, and we never ask for your name, email or phone.

Your termination statement may call it the calculation or valuation date. If you do not know, use the date your membership ended.

From your statement: the yearly pension payable from your unreduced retirement age, not counting any bridge.

A temporary amount paid until 65. Leave blank if your statement shows none.

Some plans only offer a lump sum if you leave before a certain age. Your plan booklet or termination statement says.

Tick any that apply
Already have your plan’s figure? (optional)

Leave blank to use the date your plan works out the lump sum. Your age on this date sets the tax-sheltered limit.

Some termination statements show the yearly pension the plan uses for the federal limit. If yours does, it is more exact than the pension above.

Only if your statement uses these exact words. When it is higher than the formula limit, it becomes your limit.

Interest rates as of October 28, 2026 (the rates for lump sums worked out in November 2026; estimates for later dates use them too). Life expectancy uses the actuaries’ tables in force on your plan’s date, including the new ones that apply from April 1, 2027.

How much can stay tax-sheltered

For a transfer to a retirement account, Income Tax Regulations section 8517 generally multiplies the yearly lifetime pension given up, adjusted under tax rules, by an age factor at transfer. Its table lists 9.0 under age 50, rising to 12.4 at 64 and 65. CRA confirms those factors and adjustments between birthdays, starting at 49. These are tax factors, not permission to transfer at those ages.

A temporary bridge is not lifetime pension, so it is excluded from this pension amount. Ask for the plan's tax-adjusted pension and confirmed limit. A net contribution account can raise the limit when the full entitlement is transferred.

Anything above the permitted limit is paid as taxable cash. The lump sum and the tax-sheltered limit are different figures.

Separate the transfer from any taxable payment

CRA distinguishes a qualifying direct transfer from money paid to you. Request a written breakdown of the direct transfer and taxable amount. Available RRSP room may permit a separate deduction for excess; it does not enlarge the pension transfer limit. Confirm the contribution and deduction before relying on them.

Locked-in money after a transfer

Under Ontario's rules, locked-in money generally provides retirement income; unlocking exceptions require an application and eligibility checks. It is not an ordinary savings account. Ask the receiving institution which rules apply to your funds. The LIRA vs locked-in RRSP guide explains the account questions.

Compare the household income, not a winning age

Compare consistent start dates and before- or after-tax amounts. Which inflation increases are contractual, and which are assumptions? What happens with weaker investment returns, a longer retirement or a surviving partner? Include investment costs, other savings and household spending.

Request the actual indexing, bridge and survivor terms. FSRA explains that a completed transfer to a LIRA or LIF gives up the plan pension and related benefits and cannot be reversed. Record unanswered questions before making an election.

Find your own plan's rules

Frequently Asked Questions

Q:Is a commuted value the cash I can spend?

A:No. It values the future pension income you would give up. Your statement needs to separate the permitted transfer, locked-in money and any taxable cash. The headline amount does not show what you could spend after tax or when you could access the retirement money.

Q:Do all pension plans have the same transfer deadline?

A:No. Use your own options statement and ask the administrator to confirm the election deadline, quotation expiry and required forms. Ask what happens if no election is received. A deadline or age limit from another plan does not establish your eligibility, and an old quotation may need recalculation.

Q:How much of a commuted value can go into a LIRA?

A:The permitted amount depends on the federal transfer limit and the pension rules governing your funds. The tax calculation generally uses the yearly lifetime pension given up, adjusted under tax rules, and an age factor at transfer. A temporary bridge is excluded. Request the plan’s confirmed tax-sheltered amount and taxable excess.

Q:Can unused RRSP room shelter the taxable excess?

A:Available room may allow a separate RRSP contribution and deduction. It does not increase the pension transfer limit itself. CRA treats an excess transfer as income and applies contribution and deduction rules separately. Confirm your available room and the paperwork before assuming that the whole excess can be deducted.

Q:Can I change my mind after transferring to a LIRA or LIF?

A:FSRA describes a completed commuted-value transfer to a LIRA or LIF as irreversible: the original plan pension and related benefits are given up. Confirm the status of your election and transfer with the administrator. Do not assume that a cancellation period exists or that the old pension can be restored.

Q:How do I compare keeping the pension with a transfer?

A:Compare income at consistent start dates and on the same tax basis. Identify lifetime payments, temporary benefits, inflation protection and survivor terms. For a transfer projection, consider weaker returns, a longer retirement and investment costs. Include other household savings and spending; a single projected return or age cannot settle the comparison.

Question: Is a commuted value the cash I can spend?

Answer: No. It values the future pension income you would give up. Your statement needs to separate the permitted transfer, locked-in money and any taxable cash. The headline amount does not show what you could spend after tax or when you could access the retirement money.

Question: Do all pension plans have the same transfer deadline?

Answer: No. Use your own options statement and ask the administrator to confirm the election deadline, quotation expiry and required forms. Ask what happens if no election is received. A deadline or age limit from another plan does not establish your eligibility, and an old quotation may need recalculation.

Question: How much of a commuted value can go into a LIRA?

Answer: The permitted amount depends on the federal transfer limit and the pension rules governing your funds. The tax calculation generally uses the yearly lifetime pension given up, adjusted under tax rules, and an age factor at transfer. A temporary bridge is excluded. Request the plan’s confirmed tax-sheltered amount and taxable excess.

Question: Can unused RRSP room shelter the taxable excess?

Answer: Available room may allow a separate RRSP contribution and deduction. It does not increase the pension transfer limit itself. CRA treats an excess transfer as income and applies contribution and deduction rules separately. Confirm your available room and the paperwork before assuming that the whole excess can be deducted.

Question: Can I change my mind after transferring to a LIRA or LIF?

Answer: FSRA describes a completed commuted-value transfer to a LIRA or LIF as irreversible: the original plan pension and related benefits are given up. Confirm the status of your election and transfer with the administrator. Do not assume that a cancellation period exists or that the old pension can be restored.

Question: How do I compare keeping the pension with a transfer?

Answer: Compare income at consistent start dates and on the same tax basis. Identify lifetime payments, temporary benefits, inflation protection and survivor terms. For a transfer projection, consider weaker returns, a longer retirement and investment costs. Include other household savings and spending; a single projected return or age cannot settle the comparison.

FAQ sources: commuted value and transfer consequences, options statement, transfer limit and CRA transfer and RRSP rules.