My wife Zoé quit her job this morning. Her human resources director reminded her: “Do not forget to take care of your vested benefits account!”. Puzzled, she did not know what to do with this information, so I thought to myself that I should elaborate on this subject a little.
When one quits their job, they also leave the pension fund in which their second pillar was preciously kept.
This amount, ready to be transferred, is thus called “vested benefits”. It is kind of an in-between, a parallel world. But it is very real! It is not fictional, don’t worry. It is simply that, just like the amount dedicated to your retirement pension, or in very rare exceptional cases, you cannot receive it directly. It will therefore be transferred to a vested benefits account.
Rerouting your vested benefits to your new pension fund
Though you can usually expect the HR department of your new employer to remind you, it is your responsibility to inform your previous pension fund of the transfer.
Should you forget, the amount will not vanish into thin air but will rather be transferred to an institution which bears the sweat name of “Substitute Occupational Benefit Institution”.
This case is frequent, nothing bad, but it does create extra paperwork to handle.
Keep it between us, but if you do not feel like doing it, let us know, we will deal with the whole thing as quickly as possible.
If part of your assets has ever transited through the Substitute Occupational Benefit Institution, make sure it did not stay there.
Rerouting your vested benefits assets to an invested vested benefits policy or account
The law required for employees who change employers to arrange for their assets to be retrieved to their new pension fund. But it does not penalise those who do not follow this rule. Peculiar right? Indeed, this introduced what is called a grey zone.
It is thus possible to hand over your assets to a financial institution (bank or insurance) instead of your new pension fund in order to make your money yield more profit while you patiently wait for the best moment to take it out. This possibility is not systematically the best thing to do, both options and their advantages should be compared:
- The interest rate paid out by your asset manager v. the new pension fund
- The increase in insurance coverage (disability, death, old age) the retrieving of your assets to your new pension fund represents
- The financial strength of your new pension fund
- The fiscal aspect of splitting your pension plan for when you will withdraw it
Once again: if you are unsure about how to proceed, or if you have doubts about whether some of your vested benefits are somewhere on the loose, let us know, we will take care of everything!