FP Answers: What is a pension bridge and should I take it?
By Julie Cazzin with Allan Norman
Q: I’m retiring next year at age 59 and have a defined-benefit (DB) pension plan with my employer, so I will need to make some choices before starting it. What is a pension bridge benefit in a DB plan? Should I take or forego this option? I also need to decide on the percentage of the survivor benefit of my pension that will be payable to my spouse, Richard, upon death. There are several options. Richard doesn’t have an employer pension, but has roughly $250,000 in his registered retirement savings plan (RRSP) and plans to retire later than me — in four years when he reaches age 65. He has worked part time for the past 10 years and earns roughly $40,000 annually. What other options should I pay attention to? I don’t want to make a mistake. — Rinalda
FP Answers: Rinalda, I can understand your confusion and concerns around decisions about pension bridging and survivor benefits. These are decisions that will have lasting impacts on you and your husband’s lifestyles, taxes and possible government benefits. With a quick review of the basics, you’ll be able to decide which options are best for you.
All DB pension plans have a lifetime pension that may or may not be indexed to inflation. In addition, some plans offer bridging benefits, which is additional pension income paid from the time you retire until you turn age 65, at which time the bridge benefit stops.
Other plans, such as yours, allow a blending of the bridge benefit into the lifetime pension, so a smaller total pension is received before age 65 and a slightly larger pension after age 65.