A defined contribution (DC) pension is a workplace retirement plan where both employee and employer make fixed contributions to an individual account. Unlike a defined benefit pension, a DC plan does not guarantee a specific monthly income. The eventual benefit depends entirely on contributions made and investment performance.
How a DC Pension Works
Contributions are deposited into your account and invested in options you select from the plan menu. At retirement, the accumulated balance converts to income through a LIF, RRIF, or life annuity. The investment risk sits entirely with the employee.
Why It Matters in Retirement
DC pension members face decisions DB members do not — how to invest the balance, whether to annuitize or self-manage, and how to coordinate income with CPP, OAS, and TFSA. Without a guaranteed income floor, managing longevity risk becomes critical.
Related Resources
This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP professional.