The importance of naming and updating all of your beneficiaries

Planning how you want your loved ones to be taken care of after you pass away can be uncomfortable, especially when you are young and may not feel like a top priority. However, it is undeniably important to ensure that our loved ones are fully supported when we are no longer here. And the stark reality is that regardless of your age, it is never too soon to plan for the unexpected, which means that it’s never too soon to name designated beneficiaries and ensure they’re updated throughout your life pre- and post- retirement.

Under the PSPP, your designated beneficiaries receive a benefit on your death in certain circumstances, including if you die prior to retirement without an eligible spouse or children. You may have other retirement savings vehicles (e.g., an RRSP) that also provide for payment to a beneficiary in certain circumstances. Here are some important considerations regarding naming beneficiaries:

Designating your beneficiaries matters

We identify and pay the survivor and/or death benefits from the PSPP to your designated beneficiaries based on what we have on file. You can easily update your PSPP pension beneficiaries by logging into our secure e-services.opb.ca selecting beneficiaries on the e-services home page, and typing in their name (or viewing the names to confirm they’re up to date).

If you are naming beneficiaries under another plan such as an RRSP, you should consult the administrator or financial institution as to how to designate beneficiaries under that plan.

Avoiding conflicting documents

If a member has designated beneficiaries within a registered plan (such as an RRSP) they will override designations made in that person’s will. This means, if both documents are not updated and aligned correctly, you run the risk not only that benefits won’t be paid out in accordance with your most recent wishes, but also of conflict among your beneficiaries.

Ensuring all your assets have a beneficiary

Like your PSPP pension, you can also designate beneficiaries directly within other registered plans or accounts including:

• First Home Savings Account (FHSA)
• Registered retirement savings plan (RRSP)
• Registered retirement income fund (RRIF)
• Registered education savings plan (RESP)
• Tax-free savings account (TFSA)
• Locked-In plans
• Other pension plans

Understanding the limits of designating a beneficiary

Remember that under the PSPP, your designated beneficiary will not receive any benefit on your death in certain circumstances (e.g., when there is no residual benefit in post-retirement death).

Other types of plans also have rules limiting the ability to pay a benefit to a designated beneficiary. For example, depending on the jurisdiction, some locked-in plans such as a Locked-In retirement Account (LIRA) and Life Income Fund (LIF) may have restrictions on designating the beneficiary and its transfer option (e.g. remaining locked-in or unlocked) upon your death. Please check with your financial institution.

Understanding the tax benefits and liabilities

To benefit from the deferral of taxes when you die, the designated beneficiary of your RRSP must either be your spouse or common-law partner, a financially dependent child or grandchild under 18, or a financially dependent disabled child (or grandchild) of any age. Your RRIF specifically allows you the option of naming your spouse or a common-law partner as a ’successor annuitant‘ who inherits your RRIF without transferring funds out of the account, while your TFSA allows you to name your spouse or a common-law partner as a ’successor holder‘ ensuring that even income earned after death is tax-free.

While this may seem complex, the first step you can take is speaking with your tax advisor, financial planner, and/or estate planner to understand your specific investment and tax implications (the information provided above isn’t legal, personal financial or tax advice, but rather for general purposes only). Consulting a professional and having open discussions with your loved ones is important to ensure your assets are distributed according to your wishes in a manner that reduces taxes and minimizes costs.