The OPSEU Pension Plan is a defined benefit (DB) pension plan.
A DB pension aims to provide a monthly pension for life, based on a formula that uses salary and pension service to calculate the amount of the pension benefit.
What is the advantage of a DB plan?
The advantage of a DB plan is that the risk of outliving one’s retirement savings or losing one’s retirement savings in an economic downturn is spread among all plan members. You may live a long time, but others may not. It all evens out when the risks are shared.
This is the key difference between a DB plan and a plan such as a registered retirement saving plan (RRSP) or defined contribution (DC) plan. If you only have an RRSP or DC plan, all the risk is on you as an individual to save enough and to ensure your investments are protected against a market downturn.
If you haven’t saved enough, you might have to work longer than expected. The goal of a DB plan is to protect against these risks.
