Amount of the retirement pension

Under a defined contribution pension plan, the amount of the pension depends mainly on the following factors when a member retires:

• the balance of the member's account
• the member's age
• financial market interest rates
• the form of pension the member chooses

Member's balance account and age

If the pension is taken at a later date, the amount will be higher. That is because the account balance will be higher, and since the member will be older when payments begin, the payments will be made for a shorter period of time.

Even if a member is no longer an active member of the pension plan because, for example, he or she has quit work, the account balance will continue to earn interest until the member begins to draw his or her pension.

Interest rates

Also, if interest rates are high when payment of a pension begins, the pension will be higher and the amount will not change even if interest rates change later.

Form of the pension

The amount of a pension depends on the form it takes. For example, with the same capital, a pension will be higher if the member chooses a pension with a 5-years guarantee rather than a pension with a 15-year guarantee.

Payment of a pension

Usually, a pension will not be paid directly to the member by the plan's pension fund. Il will be paid by an insurer who takes responsability for it.