The Decision Grid for Pension Vs Lump Sum Payment


In today’s work market, chances are you will not retire at your first employer. As weird as it seems, it is now “cool”, or “well seen” if you prefer, to switch jobs once in a while. Apparently, “job hopping” is the new thing among millennials as they keep their job for 4.4 years on average. I guess I’m a good candidate for this study as I have had four different jobs in 14 years making my average 3.5 years per job. Since I recently quit my job, we can say that my average was more 4.67 years… almost right on spot on the stats!

While I have switched jobs, I have kept the same employer for the past 14 years. This enabled me to build a sizeable pension plan. Since I quit, I was offered the choice between keeping the pension as is or receiving a big fat check for the commuted value (also called a “lump sum payment”). I already did lots of pension calculations to explain my choice in a previous article. However, financial decisions are more than often a case of emotional decision with barely any math included in the process. It’s normal, if we were a 100% rational living species, we would be boring!

Making the Right Decision Isn’t Easy

Just to complicate everything a little bit more, there is often more than one right answer to the same question in personal finance. As I mentioned, since emotions take a big part of our decision process, it is more important to live well and accept our financial decisions than taking the mathematically optimal choice, but stress about it at night.

For example, we all know if you want the best total return, you should invest most of your money in the market. However, if each time you show a loss of 5%, your anxiety level starts going up; maybe it’s not the right decision for you. After all, the idea is that you enjoy this money, not that you die from a heart attack stressing about it!

When you look around for help, chances are you will get conflicting advice. Your financial adviser is most likely to tell you to take the lump sum payment (and invest the money with him!). Your friends and family might tell you to take the “safe route” and keep the pension. Who can you trust? Unfortunately, no one. Not because nobody is trustworthy, but because nobody will live with this decision but you. This is why you have to make your own choice: the pension or the lump sum?

A Unique Decision Grid to Help You Making the Right Decision

With that in mind I decided to use my 13 years of experience in the wealth management industry and build a unique decision grid that will help you making the right decision. The point is to forget about the math and complicated financial terms for a moment.  Let’s simplify this whole thing and make it understandable for a 10 year old. This is how you will be able to make sure you are happy with your decision and that you fully understand it.

The following decision grid has been created for anyone who faces this hard dilemma. Please note this document doesn’t replace sound financial advice from a certified financial planner. However, it is a very good start.


You can download the grid as a pdf document by Canadian Financial Summit. It’s the first time 25+ Canadian personal finance experts will be gathered in one place to share their insights, tips, and secret hacks with us in an online setting.

In my conference, I will discuss the main difference between both options, but also key questions to ask your employer before you make the decision. You will discover why now, it’s the best timing ever if you want to take a lump sum instead of your pension. Finally, I’ll close my speech with a little surprise for attendants…

You can register here for free and learn about your retiring options

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