What sets Canada’s workplace pension plans apart

Canada’s two main workplace pension plans differ primarily in who bears investment and longevity risks. Sebastien Betermier, associate professor of finance at McGill Desautels, explains that defined benefit plans guarantee employees a predetermined income throughout retirement, while employers assume the associated risks.

“A defined benefit plan offers greater financial security for employees because it provides a stable, lifelong source of income,” Betermier says. By contrast, retirement income from a defined contribution plan depends on investment performance and how long savings last.

However, these plans offer greater flexibility and portability, potentially making them better suited to employees who change jobs frequently.