Individual Pension Plans

Individual Pension Plans
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Who wrote the story?
The story titled “Individual Pension Plan: a retirement option for those with an entrepreneurial
bent”, is written by Alexandra Macqueen who is a special contributor to The Globe and Mail.
When was it written?
The story article was written on the 16th of March 2019.
What is it about?
Macqueen has written a story about Individual Pension Plans. A pension is defined as an
arrangement where the employee’s management gives payments or benefits for the employees’
retirement. The management gives the retirements benefits in exchange for the employees’
serving the company for many years (Macqueen, 2019).
The article explains how the continuous decline in pension plans is leaving workers who
are not ready to retire for options. In this regard, Macqueen proposes a one-person pension plan.
They have defined contribution plans. Under this plan, the employer contributes a regular
amount to the pension trust. A formula is used to decide the monthly contributions. The formula
incorporates the number of years of the employee’s work, the company’s business profits, and
the salary. The plan indicates the amount that the employers will contribute to the plan.
However, the plan does not indicate the amount that the employees will receive as retirement
benefits. An example is the 401 (k) plan.
Macqueen's article gives options that are available for people who are planning on
leaving a job with a defined-benefit pension plan, but are not yet ready to stop working. For
instance, pay as you go pension plan scheme. Under the plan, the employee beneficiaries are paid
the amount equal to the amount contributed. The management regularly deducts the pension
contributions from the employee’s salaries. Another pension plan version occurs when the

company contributes the entire amount to a lump sum pension fund account. Consequently, the
employee can select a plan that generates a higher retirement benefit return. Investing in a riskier
pension fund will increase retirement benefit returns. The employee can also choose another plan
where the investments are funnelled into a safer fund that generates a lesser benefit return.
Additionally, the employee can choose to receive the retirement amount in one lump amount, or
the employee can decide to receive the retirement amount in equal monthly instalment amounts.
The second method allows the retiree to receive the monthly retirement benefits throughout
one’s lifetime.
Funding principles. The fund is also classified as a plan. The fund entity is a separate
agency that manages companies’ pension plans. The fund entity receives the money invested by
the company. When the employee retires, the fund company distributes the pension and other
retirement benefits. The employer contributes to the pension fund and generates earnings. The
employee receives benefits as pension fund recipients. The fund agency accumulates the
employers’ contributions as either contributory or noncontributory (Macqueen, 2019).
They have defined benefit plan. The defined benefit plan includes the number of benefits
that the employees will receive when they decide or are forced to retire. The state requires that
employees are mandatorily required to retire when they reach a certain age. The company
allocates a regular amount for the employees’ retirement benefit plan. The benefits are based on
the employee’s total pension fund contributions. Likewise, the retirement amounts are based on
the salaries of the employees. Employees with higher salaries will receive higher pension
retirement benefits when compared to the salaries of the lower ranking line and staff employees.
Macqueen explains how one may be able to transfer commuted value of their defined-benefit
pension to an Individual Pension Plan (IPP).