There are some very confusing terms in the world of pensions. Here are some common ones:
When you leave a company where you were a member of its pension plan, you will always be entitled to your contributions plus income earned. Vesting relates to your entitlement to receive the employer contributions plus income and will be a function of length of service. Although requirements vary across the country, it is often two years.
The commuted value is the current lump sum value of an employee’s future pension benefits (at retirement). The right to commute a pension will depend on the pension legislation in place.
Pensions are intended to provide income in retirement. Most jurisdictions require locking-in of pension benefits to ensure that money will be available for you in retirement. Therefore, when you leave your company plan you do have the legal right to pension benefits but may not be able to access the funds immediately.
With these plans, you know how much is being contributed but you do not know how much the pension will be at retirement. It depends on how the money is invested and how fast it grows. These plans are similar to RRSPs where contributions are restricted by legislation. When you leave a company with a DC plan you are entitled to your share of the pension plan to date.
With these plans, the amount of pension you will receive in the future is calculated according to a formula. You have many options to consider when you leave a company.