Thursday October 5, 2023 | VICTORIA, BC
by Mary P Brooke | Island Social Trends
Many employees in the private sector will soon have a new choice for securing their financial future with legislation that has been introduced that is in line with federal changes. The new pension plan option will provide benefits for longer.
If passed, updates to the Pensions Benefits Standards Act will allow employers to offer variable life benefit plans to employees with defined contribution plans who are interested in the new pension option that was developed by the federal government.
The Pension Benefits Standards Act sets minimum standards for all B.C. employer-sponsored pension plans to protect the interests of members and the financial health of plans.
The legislation was introduced in the Legislative Assembly by Finance Minister Katrine Conroy yesterday.
“Now more than ever people need pensions they can rely on for life,” said Conroy. “That’s why we’ve made updates to our pension standards legislation, offering more options for employers, including options to better support employees with a pension plan that will serve them for their lifetime.”
Variable life benefits:
Variable life benefits were created in 2020 under federal income-tax legislation in response to consultation with national pension organizations.
Variable life benefits are a new lifetime pension solution designed to prevent people who retire with defined contribution plans from running out of money. Currently, each retiree has to manage the investments in their locked-in registered retirement savings plan (RRSP).
People who choose variable life benefits from their plan will receive a lifetime pension, with payments that go up and down based on rules under federal income-tax legislation. Pension standards require the plan to manage investments in the best interests of members.
Regulations coming in 2024:
Regulations will be developed in 2024 in consultation with Finance Canada and provinces. British Columbia joins Saskatchewan, Quebec and the federal government in updating pension standards to allow variable life benefits to be offered from defined contribution plans.
These changes also require consequential amendments to the Family Law Act, specifically on how the rules for dividing a pension between spouses who separate apply to variable life benefits.
With the changes, spouses will also have less to worry about if their partner dies before retirement. Surviving spouses will have the right to choose a pension from the plan if that meets their financial needs, instead of transferring to a locked-in RRSP, giving them greater peace of mind.
Part of retirement planning:
“Pension plans are a big part of planning for retirement, and it is our responsibility to try and protect people during life’s big financial decisions,” said Blair Morrison, chief executive officer, BC Financial Services Authority. “These changes to the Pension Benefits Standards Act offer more choices for people, allowing them to have more control over their future financial well-being, which is something we strongly support.”
Reducing employer admin costs:
Changes to the act are a response to consultation with stakeholders by helping reduce the administrative costs for employers of offering and administering a pension plan. Additionally, people who transfer benefits from their plan to a locked-in registered retirement income fund or an insured life annuity will also benefit from reduced burden and fewer fees if their plan restricts those transfers.
Registered pension plans across Canada have to comply with pension standards legislation and the federal income tax legislation.
