The article “Where Should I Transfer My Pension?” was originally published on MoneySense on October 11, 2016.

Rachel has two options: a bank or an investment firm

Q: I am recently out of the military and not sure where to transfer my pension. I’m considering a bank like BMO or an investment firm such as Manulife. I’m still young and won’t be withdrawing for at least 20 years.

What are the big differences?

—Rachel

A: I think one of the first questions you should be asking yourself, Rachel, is not where to transfer your pension, but should you transfer your pension?

I suspect you have two options. The first would be to leave the pension intact and draw a monthly payment at some point in the future (generally after age 55). The second would be to take a lump-sum “commuted value” and transfer some or all of it to a locked-in RRSP (that would not allow withdrawals until 55 and only limited annual withdrawals thereafter).

Some part of the commuted value may be taxable to you and ineligible to transfer to a locked-in RRSP. This is especially common with lucrative defined benefit plans and particularly emphasized by today’s low interest rates (low rates mean higher payouts that are often more than what you can otherwise transfer to your locked-in RRSP).

A number-crunching exercise will help you assess the long-term tax and retirement income implications of taking a lump-sum now versus a deferred payment in retirement and decide what’s best for you, Rachel.

If you choose the lump-sum option, I think it’s important for you and other readers to know that it’s not just as easy as deciding between a bank and an insurance company to invest your money.

Banks have many different potential investment options. You can open a self-directed, DIY account at a bank’s discount brokerage division. At the branch level, they will typically offer GICs and mutual funds issued by that bank, but not others. There may be one or more full-service or wealth management arms that offer pooled funds, stocks, bonds, ETFs, third-party mutual funds, third-party GICs and so on.

It’s important to note that within the wealth management divisions of the banks, the advisors may offer very different services. The bank may provide the forum for their investment services, but some advisors may focus their business exclusively on mutual funds. Some may specialize in ETF portfolios. Some may only offer discretionary investment management, where you are not part of the day-to-day decisions.

On that basis, you can’t just choose a bank to invest your money. You’re really choosing the advisor and there are a wide range of options, skill-sets, service levels and price points even within the same bank.

An insurance company may offer very similar investment options and a comparable experience to a bank, Rachel.

I think in order to get something truly different from a bank or an insurance company, you need to consider a private investment company, which can range from small firms with a couple of partners to large independent companies with multiple offices across the country.

Regardless, Rachel, everyone has their own approach to investing and what they think is going to make you successful. You need to try to determine the best approach for you personally.

At the far end of the spectrum of options you are considering is a new class of investment companies called robo-advisers, building low-cost ETF portfolios that are mostly passive and contrary to the typical active approach of banks, insurance companies and private investment firms.

The main questions for you, Rachel, are:

1. Should you be transferring your pension in the first place?

2. What level of service do you want or need from an adviser and do you want to be involved in the investment decision-making process?

3. Do you want active management where you try to beat the markets or do you have a bias towards passive management and just buying the markets?

4. Do you have enough money to be an attractive client to an adviser? Robo-advisers have no or low minimums, while banks, insurance companies and private investment companies may have minimum investment thresholds.

The point is, it’s not just as easy as picking a bank versus an insurance company, I’m afraid, Rachel. It may take a bit of investment education first to try and figure out what’s best for you. But first things first, consider the long-term implications of taking a lump-sum payout for your pension versus leaving it in the plan.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.