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What Is A
Defined Benefit
Pension?

What is a Defined
Benefit (DB) Pensions?

  • Over 1.3 million Canadian retirees and their spouses rely on defined benefit pension plans.
      

  • A defined benefit pension plan is part of an employee’s total compensation package and is legally considered deferred compensation.

  • A defined benefit pension consists of deferred wages that are earned while an employee is working and collected when they retire.  
     

  • The annual pension amount is calculated using a formula that reflects an employee’s salary, length of service and age.
     

  • Pensioners have planned their retirement based on their defined pension income.
     

  • Pension income is taxable in the hands of pensioners.

How Are DB Pensions Regulated In Canada?

The pension regulatory framework in Canada is very complex.

 

Canada has two tiers of legislation that impact pension security. Eleven different jurisdictions are responsible for pension legislation and regulation.

Federal insolvency legislation is the primary legislation. In the event of a conflict, it supersedes other pension-related legislation. 

Pensions are also governed by additional federal and provincial pension benefit and corporate governance legislation.

 

In April 2023, CFP and our partners successfully secured the passage of the Pension Protection Act, which gives super-priority status to single-employer defined benefit pension plans in situations of insolvency.

 

CFP is monitoring the implementation of this legislation and will proactively defend any legal challenges.

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