Commuted Value

Let’s say you’ve worked for the local government of Ottawa, Canada for 22 years, and you’re three years away from your 60th birthday...and from collecting that pension. What a glorious day it will be when you can retire to Halifax. You'll have built up that pension for 25 years, and you can then start that commercial fishing operation you've been dreaming about all that time.

But one day, you come to work and find out that your new boss is a 33-year-old "ex-hockey player who loves to talk about where he went to school. He won’t leave you alone. He just talks, and talks, and talks. And micromanages you into the ground. If he keeps it up, you’re not going to make it to 60. Instead, you’ll be serving a life sentence at the Milhaven Penitentiary. You don’t want that. So, you’ve decided that you’re going to quit your work as a mapping technician and start living that dream in Halifax.

What's going to happen to that pension?

Well, good news. You're still going to get a nice payout. You'll receive the "commuted value" of your expected pension. The "commuted value" is a lump sum payment. It's assessed at the present value of the earned benefits and future cash flows.

With this money, you can put it to work in the markets. If you can replicate the pension board’s investment strategy, you could earn the expected payouts of your future pension payments, and you won’t have to deal with Billy ever again.

You can take a new job. You could be a technician again...just with a better company.