Job loss or career change? Understanding your pension options

Losing a job or making a career change can feel overwhelming. There’s a lot to process — emotionally, financially, and practically. One of the biggest questions people face during this transition is what to do with the pension they’ve built with their employer.

It’s a decision that can have long-term implications, and it’s one many people don’t feel prepared to make.

This guide is designed to help you understand your options so you can move forward with clarity and confidence.

What happens to your pension when you leave a job?

When you leave an employer (whether through job loss, restructuring, or a voluntary career change), you’re typically faced with two main choices:

• Leave your pension in the company plan
• Take the pension with you
   

If you have a Defined Contribution (DC) pension plan, this often means transferring your pension to a Locked-In Retirement Account (LIRA), where you can invest it and continue to save for retirement.

If you have a Defined Benefit (DB) pension plan, you can take the commuted value as a lump sum.

This second option is known as pension commuting. It’s a term many people haven’t heard before, but it’s an important concept to understand before making a decision.

Option 1: Leaving your pension in the company plan

For some, keeping the pension where it is may feel like the easiest choice. The plan continues to grow based on its rules, and you’ll receive income from it in retirement.

This option may make sense if:

• You prefer predictable, defined income in retirement
• You’re comfortable with the plan’s structure and benefits
• You value the stability of a traditional pension payout
   

It’s important to understand the plan’s rules, what your spouse or beneficiaries would receive, and how inflation may affect your future income.

Option 2: Taking the commuted value

Defined Benefit pension plans promise you predictable monthly income in retirement, which is calculated based on a specific formula (usually your salary and years of service). The commuted value is the present-day lump sum of what your future pension is worth.

If you choose this option, you can transfer the funds into a Locked-In Retirement Account (LIRA), up to the CRA maximum; a Registered Retirement Savings Plan (RRSP), if you have contribution room; or a taxable investment account for any excess above the CRA limit. This gives you more control over how the money is invested.

This option may be a fit if you:

• Want more flexibility and control
• Prefer to manage your own investment strategy
• Are comfortable with market fluctuations
• Want to integrate the funds into a broader retirement plan
   

Just like the other option, it comes with important considerations such as tax implications, transfer limits, and the responsibility of managing the funds over time.

What to do in the first 30 days after leaving a job

This is a period where emotions run high and deadlines matter. A few practical steps can help you stay grounded:

• Review your termination package — including pension documents and deadlines.
• Confirm whether interest rates affect your commuted value — timing can matter.
• Check your benefits end date — especially health and life insurance.
• Avoid signing anything immediately — give yourself space to understand your options.
• Speak with an advisor before making a pension decision — especially if you’re unsure.
   

These early steps can prevent rushed decisions that are hard to reverse later.

Common mistakes people make during this transition

We see these often, and they’re all avoidable:

• Rushing the decision because the paperwork feels urgent.
• Assuming the pension plan representative is advising them — they’re not; they’re administering the plan.
• Focusing only on the lump sum without understanding taxes or long-term income needs.
• Not considering their spouse or partner’s needs.
• Making decisions based on fear or frustration rather than a long-term plan.
   

A calm, informed approach makes a world of difference.

Questions to ask before you decide

These can help you get clear on what matters most:

• What income will I need in the next 12–24 months?
• How does each option support the lifestyle I want in retirement?
• How comfortable am I with managing investments during a career transition?
• What does my spouse or partner need for stability?
• How important is flexibility versus guaranteed income?
• How does this decision fit into the next chapter of my life?
   

Your answers will point you toward the option that aligns with your goals and values.

Why this decision matters

Pension decisions are often irreversible. Once you choose a path, you typically can’t go back. That’s why it’s so important to understand your options fully — and why many people choose to work with a professional advisor rather than relying solely on their pension plan representative.

This isn’t just about numbers. It’s about stability, confidence, and making sure your next chapter is built on a strong foundation.

You don’t have to figure this out by yourself

If you’re facing job loss, a career change, or a major transition, we’re here to help you understand your pension options and choose the path that supports your long-term goals.

A clear plan can make a difficult moment feel a little more manageable and help you move forward with confidence.