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Public Service Pension Plan Retirement Planning Information Session
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  1. Public Service Pension Plan Retirement Planning Information Session You and Your Pension Plan

  2. “…to help you understand the benefits of your Public Service Pension Plan” Objective This handout is provided for information purposes only and does not constitute a legal document on your rights and obligations. Should there be any conflict between the information in this document and that contained in the Public Service Superannuation Act and Regulations, or other applicable laws, the Act and Regulations apply.

  3. Today’s Topics • How your pension plan works • Service Buyback • Supplementary Death Benefit Plan • Retirement Benefits • Indexing • CPP/QPP Coordination • Re-employment after retirement • Survivor Benefits • Pension Benefits Division

  4. www.pensionandbenefits.gc.ca

  5. Pension Plan Contributions for 2012 • Contribution rate is 6.2% on salaries up to yearly CPP/QPP maximum of $50,100 • Contribution rate is 8.6% on salaries above yearly CPP/QPP maximum of $50,100

  6. Pensionable Service • Current service • Service Buyback • Canadian Forces / RCMP service • Pension Transfer Agreements

  7. Non-Pensionable Service • Strike • Suspension • Unauthorized Leave Without Pay • Seasonal Lay-off • Authorized Leave Without Pay(not purchased)

  8. Service Buyback Can you buyback prior service?

  9. Types of Service Buyback • Prior public service (PSSA) • Non-Contributory • Contributory • Part-time Service • Unpurchased periods of Leave Without Pay • Canadian Forces / RCMP service • Non-Contributory • Contributory • Reserve Service

  10. Types of Service Buyback • Pensionable Employment • Subject to pension plan • Approved pension plan must be registered under the Income Tax Act • Must enter Public Service within 2 years of leaving outside employer • Pensionable Employment Questionnaire must be completed by outside employer • Double rate of contributions

  11. Methods of Payment • Lump sum payment and/or • Monthly instalments Payment period - under age 45 / up to age 65 - age 45 and over / 20 years • Debt cancelable by death

  12. Sample of a Public Service Buyback • Service: 1/1/1975 to 31/12/78 (4 years) • Born: 1952 (male) Benefit Increase = $ 61.83

  13. The Buyback Process • Estimate of cost • Legally binding agreement • Medical examination • Made while employed as a plan member • Income Tax implications • Public Service Pension Centre 1-800-561-7930

  14. Advantages of Purchasing Service • More service……more pension • Service is fully credited before it is paid in full • Life insured • Earlier retirement • Reach 35 years service more quickly • Income tax deductibility

  15. Supplementary Death Benefit Did you know that you have “life insurance” from your employer?

  16. Supplementary Death Benefit • Term life insurance • Coverage: double your annual pensionable salary (to next multiple of $1,000) • Cost: 15¢ a month per $1,000 of coverage • Coverage of $10,000 is free at age 65 • Reduced by 10% per year effective age 66 • Designation of beneficiary 1-800-561-7930

  17. Naming a Beneficiary A beneficiary can be: • Estate • A person age 18 and over • Charitable / benevolent / religious or educational institution Where no beneficiary is named: • Estate

  18. Retirement Benefits What are my options when I retire?

  19. Retirement Benefits Two types of retirement benefits: • Lump Sum Payments • Return of Contributions • Transfer Value • Monthly Payments • Immediate Annuity • Annual Allowance • Deferred Annuity

  20. Lump Sum Benefit Return of Contributions Only option available to those with less than 2 years of pensionable service (not vested).

  21. Must be less than age 50 at termination Must have at least 2 years of service Actuarial value of accrued pension benefits Must be transferred to a locked-in RRSP, another registered pension plan and/or purchase an annuity Lump Sum Payment Transfer Value Payment

  22. Lump Sum Payment Transfer Value Tax Considerations • Amount within tax limit must be transferred to a locked-in RRSP, another registered pension plan and/or purchase an annuity. • Amount in excess of the tax limit is paid to the member and taxed. • Amount in excess of the tax limit paid to RRSP if you have available RRSP “room”.

  23. Lump Sum Payment Transfer Value Buyback • Must purchase within the first year of • becoming a plan member • One-time opportunity to purchase • No monthly instalments • Lump sum required • Medical

  24. Pension Benefits How is your pension benefit calculated?

  25. 2% X 35 years X $52,934 = $ 37,054 per year/ $ 3,088 per month 2% X 25 years X $52,934 = $ 26,467 per year/ $ 2,205 per month Benefit Formula (Full-Time) Years and days of Average salary for 5 2% X pensionable service X consecutive years of highest paid service

  26. 2% X 5 years X $52,934 X 20.0/37.5 = $ 2,823 per year $ 235 per month Benefit Formula (Part-Time) Years and days Average salary Assigned 2% X of pensionable X for 5 consecutive X Work Week service years of highest Standard paid service Work Week

  27. Full-Time Service 2% X 35 years X $ 52,934 X 37.5/37.5 = $ 37,054 annually $ 3,088 monthly Benefit Formula (Full-Time and Part-Time) • Full-Time and Part-time Service • 2% X 30 years X $ 52,934 X 37.5/37.5 = $ 31,760 annually $ 2,646 monthly • 2% X 5 years X $ 52,934 X 20.0/37.5 = $ 2,823 annually • $ 235 monthly • Total = $ 34,583 annually • $ 2,881 monthly

  28. Calculating your Public Service Pension Your Public Service pension is coordinated with Canada Pension / Quebec Pension Plans • Pension includes: • Lifetime pension (paid from date of entitlement for life) • and • Bridge benefit (if you are entitled before age 65)

  29. Lifetime pension and Bridge benefit If you retire before age 65 and apply for CPP/QPP at age 65: Bridge Benefit (public service pension plan) CPP or QPP Pension Pension Income Lifetime Pension (public service pension plan) Age65 Retirement

  30. Monthly Benefits What do these terms mean to you? • Immediate Annuity • Annual Allowance • Deferred Annuity

  31. Immediate Annuity –(unreduced benefit) Monthly Benefits

  32. Monthly Benefit Immediate Annuity • Payable upon termination • Indexed from year of termination • Supplementary Death Benefit coverage is automatic

  33. Monthly Benefit Annual Allowance (reduced benefit) • Payable at the latest of : age 50 : date of option or : date of termination • Subject to reduction • Immediate annuity possible in the event of permanent disability • Supplementary Death Benefit coverage can be automatic

  34. Annual Allowance Reduction Formula Formula 1 5% x (60 – age) Formula 2 5% x (55 – age) Greater reduction of: or 5% x (30 – service) Under 50 years of age or Formula 1 Under 25 years of service 50 years of age and over Formula 1 and Smaller reduction of: or 25 or more years of service Formula 2

  35. Monthly Benefits Deferred Annuity (paid in the future) • Payable on 60th birthday • Indexed from year of termination • Annual allowance can be requested at age 50 • Immediate annuity possible in the event of permanent disability • Supplementary Death Benefit coverage not automatic

  36. Voluntary - Supplementary Death Benefit - Canada Savings Bond - Income Tax (extra) - PS Health Care / Dental Monthly Deductions

  37. Public Service Health Care Plan Individual MonthlyCost Employee: Pensioner: Family Monthly Cost Employee: Pensioner:

  38. Pensioners’ Dental Services Plan

  39. Indexing Am I on a “fixed income” as Public Service retired member?

  40. Indexing • Annual cost of living increase • Based on average of Consumer Price Index • Increase is effective January 1 • First increase is pro-rated and based on month of termination

  41. Month of Retirement Percentage of Indexing

  42. Canada/Quebec Pension Plan Coordination How does the CPP/QPPcoordination affect my pension benefits?

  43. CPP/QPP Coordination 2012

  44. Bridge Benefit Formula for 2012 0.00625 x 35 years x $ 47,360.00 = $ 10,360.00 / annually $ 863.33 / monthly 0.00625 x 25 years x $ 47,360.00 = $ 7,400.00 / annually $ 616.66 / monthly

  45. Bridge Benefit Factor

  46. LESS Years and days of Lesser of the average .00625 X pensionable service X salary or CPP/QPP average maximum pensionable earnings Pension Formula (Full-Time) Years and days of Average salary for 5 2% X pensionable service X consecutive years of highest paid service Bridge ends at age 65

  47. Bridge Benefit Considerations • Bridge benefit ends effective: First of the month following 65thbirthday or Entitlement to CPP/QPP disability benefits • Application must be made for CPP/QPP benefits • Early retirement benefits available with CPP/QPP