five reasons

… to take cash rather than a company pension The world of pensions tends to cleave into defined-benefit plans, in which an employer holds money and takes the risk that returns may or may not be enough to meet obligations, and definedcontribution plans, in which the employee invests money at his or her own risk. Taking the money out of a company pension plan as cash, often possible if one terminates employment before scheduled retirement, or transferring it to a deferred income plan such as a locked-in retirement account can make sense.

1 If you have other pensions such as CPP, OAS and former or even current company pensions and they are adequate for retirement income, taking cash from a DB plan to diversify investments can add to potential growth. The existing pensions in the plans create a floor for future income, so the risk of investing can add to future assets and income, says Adrian Mastracci, a financial planner who heads KCM Wealth Management Inc. in Vancouver.

2 You can take cash to invest in your own choice of stocks, bonds or funds. With fund investments, you can add managers or assets of your own choice. If you are an experienced investor or you know a sector well, perhaps because you have worked in it, selfinvesting can have a good result, notes Dan Stronach, a financial planner who heads the Stronach Financial Group in Toronto.

3 You want to quit. If the early retirement penalties are high and you quit, you may be able to get an advantage by taking out a measure of the commuted value — what the pension is worth — and roll the money into a deferred pension plan like a LIRA with no tax on the transfer. This works if you plan to extend your working life, effectively delaying the pension payout and perhaps lowering tax until full retirement, Mr. Stronach says.

4 The company is in trouble and you are not confident of the adequacy of funding of the pension plan.

5 If you are planning to leave Canada for a lower-tax jurisdiction, you can arrange to take the money, pay tax as charged and have lower future tax rates on the income the money generates. It is essential, however, to check Canada’s tax treaties with your next country of residence.