There is finally a way for those receiving GM pension buyouts to make them tax free lump sum pensions. It is my intention to explain this additional option in this post so that you can discover how you can save the extra cost of being over taxed (my definition, of course) when receiving a lump sum.
The new option is known as a copycat annuity.
However, the option to commute a defined-benefit pension plan to a copycat annuity really does depend on the requirements set out in the pension plan, as well as your own individual situation.
An example of this would be that you should not be within ten years of retirement age. Canadian pension plans do vary, though you may find that you will be allowed to commute using the copycat annuity option.
A full-service financial advisor can advise you on your individual case as to whether you would qualify for using the copycat annuity option.
Since 2008, when so many of us in the GM workforce were pushed out into early retirement, several of the hourly AND salary employees who opted for a commuted value lump sum payment pension paid an extremely high priced taxation on anything over their allotted allowable RRSP contributions.
This copycat annuity had not been able to be used previously due to a conflict between the pension and tax legislation, which has now been resolved. So… though the Canada Revenue Agency now permits this approach, you need to understand that not very many financial specialists seem to be aware of this option.
Worried About Your Pension?
My advice to you is to find that full-service financial consultant or advisor who is not only aware of the copycat annuity, in many cases but they may even recommend it.
So, if you are concerned about the financial capability of your pension plan lasting should you accept a monthly payment pension… or you think you may be facing a humongous tax bill should you decide to take the commuted value instead… then really, what have you got to lose by finding that full-service financial advisor (a well recommended on is always best), and setting up an appointment for that person to go over your options with you… before you are staring that option in the face.
You may be wondering why I would suggest a full-service financial advisor.
Well, I learned that mine receives compensation in the form or a percentage of the amount of money that he is managing for me. And, regular reviews with me ensure that my portfolio is aligned with my own risk tolerance and goals… which were both determined during the first few visits with my chosen financial advisor.
Those costs and my advisor’s compensation would both stop if these reviews were not taking place at least twice a year. That is how strict this one particular agency is that their customers must ALWAYS be happy.
How many other firms can say this?
Plus, my advisor has NEVER made me feel like my investment is too tiny to bother with.
For my advisor, what you and I know to be a measly bit of investment funds is never to small an amount to pay attention to in making the investment profit for you and I.
I have had other financial advisors over the years, so I am going to be real honest with you here, for your advisor, pick a full-service financial advisor who will offer you the resources and guidance that no other financial agency can.
The yearly management fees are very reasonable too; in fact, I have told my advisor that I feel he is under paid when looking after my measly sum. His response to this is that he feels he is paid a fair amount for the services he rendered.
You have no need of worry either; as your financial advisor they are NEVER to tell anyone else anything about your meetings with them. Your information is to be kept confidential. No one but you and your chosen financial advisor will know, unless you instruct them otherwise.
Since my forced retirement in 2008, I can tell you that investing my RRIF through my chosen full-service financial advisor; he has made it possible for me to pay off a substantial mortgage on my home. That debt had me concerned at the start of my retirement.
Now my funds have been invested so very well over the years that I STILL have ample funds remaining invested for later use. Look out! Renovations are in the works.
If nothing else, I do hope that you will check out the latest option so that you may be able to benefit even more than those of us forced out of the workforce in 2008.
The reason I have refrained from mentioning the name of the agency and/or my full-service financial advisor is that his agency does NOT approve of advertising like this but rather through word of mouth. So, if we are connected on Facebook, private message me there… or email me and I will gladly share this info with you.
It’s my guess that when too much attention is focused on any one business, other businesses in the same niche tend to try and destroy the one getting all of the attention. Yup… the business world can be like swimming with sharks for sure, as those of us who have worked for the Big Three can surely attest to, right?
Glen Grill and Tim Bailey recently published a great article in the May 2019 issue of the Unifor newsletter, in which they listed 4 essential questions you should ask a financial consultant that you are seriously considering hiring, which I thought were well thought out. They are as follows…
1.) How lone have they been working in this field? As a rule of thumb, a minimum of 10 years is a good guide to a consultant’s abilities.
2.) How are they paid? This could be salary, fee-based, commission or combination. Consider this factor when making your decision.
3.) Determine the client/consultant relationship? How often and by which method will they maintain contact with you? How often will your investments be reviewed (monthly, quarterly, yearly)? How often will you hear from them, and will it be directly or through an assistant?
4.) Will they provide references from clients who have been with them for at least five years?
PLEASE Note: In regard to question 4, references need to come from the customers themselves, NOT the financial advisors. It is my understanding that it is against the law for any financial advisor to offer any name of those who might provide them with a reference.
Feel free to ASK me who my advisor is and I will GLADLY tell you. His company only asks that I NEVER advertise… and yes, posts would be considered a form of advertising even though you and I would consider it a review.
Should you have any questions regarding the copycat annuity, or just want to add to the conversation, I hope you will feel free to leave me a comment below. I make it a habit to answer all comments in a timely manner.
Given my passion for genealogy, is it any wonder that I eventually wanted to publish my work? Learning to use a personal computer was a natural step once I was introduced it in the 1990s. Then the internet offered a second means to "publish" and now, here I am with a personal blog.