Good day Everyone,
Welcome today to my Transition Seminar pension presentation.
Please note that this recording is specific for the My
Transition Group and it covers both Regular and Reserve Force
members.
Today we will do a few topics.
We will see where you can find the information online about
your pension.
We will talk about the benefit calculation.
We'll see how we calculate the Regular Force pension and the
Reserve Force pension.
We'll talk about the benefit entitlements and options.
We'll cover the deductions that will continue from your pension
payment and the one that will cease.
Then we'll talk about indexing.
We'll see how your monthly pension will be increased each
year based on the cost of living.
We'll cover the survivor benefits and we'll see how the
survivors get paid at time of death. Group insurance benefits,
we'll talk about the health, the dental and the life insurance
and we'll cover also the re enrollment after release.
So let's start with the pension and benefit website.
This is the link for your website.
The website has a purpose to provide you with general
information about your pension plan.
Whether you're a Reserve Force member or a Regular Force
member, you will have specific information based on the
population you pertain to.
Also on the website you will have access to all the pension
forms.
However, any topic you're dealing with, you will be
receiving a package with the specific forms that you need to
complete.
Worst comes to worst, please contact us at the Government of
Canada Pension Center.
We'll be more than happy to help you and provide you with the
counselling.
Also on the website, you will have access to the My CAF
Pension which is the new tool, personalized tool where you can
access your pension information.
The tool is up to date with your current career, with your
service and your salaries.
This way you can estimate your pension.
You can compare up to five codes and estimate your future
entitlements.
Know that the website is accessible from home using any
type of device.
However, the My CAF pension you need to be using a DWAN because
it's secure information.
You don't want your personal information being freelanced on
the website.
Let's talk about the basic benefit calculation.
How do we calculate your pension?
Please note that your basic benefit calculation will include
both your lifetime pension and your bridge benefit.
The bridge benefit is a portion that is paid, included in your
monthly pension to bridge you, to update you up to age 65 when
your regular CPP or QPP will kick in.
So let's talk about the regular pension plan calculation.
So the formula is 2% which includes both your lifetime plus
your bridge times your pensionable service and the
pensionable service is seen in terms of years and days.
We do pro rate up to half a day.
If you do have some Reserve part time service, it will be
adjusted for the Reserve service as there is a proration to be
done based on the number of days you are working.
In terms of the highest average salary, we use the five best
consecutive years.
99% of the time it will be the last five as a career usually
goes by increasing.
Here's 2 scenarios.
2 individuals releasing at the same time, both making the same
average salary of $90,000.
The first one has what we call a full pension, which is the
maximum of 35 years of pensionable service.
The second individual has the 25 years a requirement to release
with no penalty.
You can see on the monthly gross pension.
Obviously the more pensionable service you have, the better
pension you will get.
The highest average salary you are making, the better pension
you will get.
Note that these calculations are monthly gross. At the pension
center,
we do not speak net, however on the My CAF pension tool, you can
estimate your net pension, include all the deductions that
you wish to continue and you will have an estimate of your
net pension, which is the best tool, the best way for you to
plan your release.
If you're releasing under the Reserve pension plan, the
formula will be different.
The same 2% will apply which includes your lifetime plus your
bridge times your updated pensionable earnings for your
full career.
So basically we will use all the earnings you made while a
reservist, pensionable earnings where you were contributing to
your pension, and we will update them to today's reality.
We call this the the wage measure.
This way your old salaries reflect a little bit a higher
income based on today's reality.
2 scenarios, two corporals releasing at the same time, both
with 20 years of service.
The first scenario has two days per week of work.
The second scenario has three days per week of work.
Obviously you can see that the earnings are higher.
That means you're contributing more to your pension.
This means that you will get a higher pension.
However, Please note that as soon as a Reservist rolls over
into the Regular Force Pension Plan, we will be using the Reg
Force formula and not the Reserve Force.
Keep in mind that the best way to review your pension is use
the My CAF Pension tool.
This way you have the best estimate of your income and you
can better plan your retirement.
The Bridge Benefit, As I mentioned earlier, the bridge is
a portion that is paid temporarily to bridge you to
offset you until age 65 or the bridge could stop before age 65
only if you are collecting your CPP Canada Pension Plan or your
QPP Quebec Pension Plan for disability reasons.
How does the coordination work?
So let's say someone releases and they're collecting their
retirement pension.
They're getting their full 2%, which includes their lifetime
plus their bridge.
The bridge is there to be paid to you from the day you start
collecting your pension up to age 65.
This way you maintain a decent income until 65, once you start
collecting your regular CPP or your regular QPP.
However, it doesn't mean that your bridge will necessarily be
equal to your CPP/QPP because there are two different pension
plans.
Each of them will pay you based on their contributions.
If you consider someone who never worked before the Canadian
Armed Forces, who always contributed to their pension the
same years that they contribute to their CPP/QPP, both bridge
and CPP/QPP should be fairly close.
This is what we call the perfect coordination.
The best way to plan that coordination is to access the My
CAF pension to see your bridge amount.
This way you'll know in advance how much bridge will cease at
age 65.
At the same time, contact Service Canada for your CPP.
If you are collecting QPP, contact Retraite Quebec and they
will provide you with the estimate of your CPP or QPP at
age 65.
This way you know the amount that will cease and you will
know the amount that will kick in at 65, and then you can plan
that coordination.
In 1987, CPP and QPP decided to create more flexibility to
Canadians.
So as of 1987, someone could collect their CPP or QPP as
early as age 60, we call this an early CPP/QPP, or they could
defer their CPP/QPP up to age 70, we call the deferred
CPP/QPP.
Keep in mind that these changes in 1987 had no impact into the
Canadian Armed Forces Pension Plan because they're two
separate legislations, which means taking your early CPP/QPP
or deferring your your CPP/QPP has no impact on your bridge.
Let's look at the early CPP/QPP scenario.
You are retiring, you're releasing, you're getting your
monthly pension, which is your lifetime plus your bridge.
Your bridge will continue up to age 65.
That's the plan.
You decide to collect your early CPP/QPP as early as age 60.
You can see that the bridge benefit will continue up to age
65.
No impact.
This means that you are accessing more money between 60
and 65 because you are getting your lifetime plus your bridge.
And on top of this, you are collecting your early CPP/QPP.
Keep in mind that anything you collect before the prescribed
time will be reduced.
On the other side, if you are releasing and you are collecting
your lifetime and your bridge, your bridge will cease at 65 as
per the Canadian Armed Forces legislation.
You decide to defer your CPP or your QPP to the latest which is
age 70.
The bridge will still cease at age 65, so therefore you can see
a shortfall between 65 and 70.
However, your your CPP/QPP will be increased because you're
deferring it for a later time.
So through these two scenarios, you see that whenever you decide
to collect your CPP/QPP between 60 and 70, your bridge will
still cease at 65.
The only time that bridge will cease before 65 only for one
reason.
As mentioned earlier, if you are collecting CPP or QPP for
disability reason and this is your obligation to let know the
Government of Canada Pension Center, this way, we will cease
your bridge at that time.
Otherwise, you will be facing bridge overpayment.
Now let's talk more about pension entitlements and
options.
As soon as you have over two years of pensionable service,
you are vested into the pension plan, which means you will be
entitled to a pension.
If you release before age 50, you have the option to take your
transfer value.
A transfer value is a lump sum payment.
Basically, the transfer value reflects the present value of
your future deferred annuity.
The deferred annuity as a monthly pension payable at 60
without a reduction.
The transfer value objective is to pay you today the money you
require to invest in the market.
This way you should receive something similar as your
deferred annuity payable at 60.
However, this will depend on the investment rates and how you are
managing your funds because taking a transfer value means
that you are cutting ties with a pension plan.
So you are on your own, you are taking your payout, you are
investing it in the market.
You could receive a higher amount than the deferred annuity
that the Government of Canada would have paid you.
Also, you could receive a lesser amount.
So the burden of the investments is on your shoulders and there
are no more guarantees.
You are on your own and because you are cutting ties with the
pension plan, this means that there is no indexing, there is
no survivor benefits, there's no health or dental coverages.
If you wish to keep your supplementary death benefit,
which is the life insurance, it will be under commercial rate
which means it's more expensive.
Also keep in mind that you have one year from ceasing to make
this option.
After the one year, the default option will be your deferred
annuity payable at 60 on a monthly unreduced.
Taking a transfer value has also an income tax impact.
Not the whole value will be paid to you directly.
A portion of that transfer value is considered the amount within
tax limit and that portion will need to be transferred to a
locked in vehicle.
It could be a locked in RRSP, a registered pension plan or to
purchase a life annuity and it will be locked in under the
provision of the province where you live.
The other portion is considered the amount in excess of the tax
limit and that portion will be paid to you directly and as an
income.
It will be taxed at source.
If you have some RRSP room, you can put a portion of that amount
into your RRSPs.
So this was the lump sum option.
Now let's talk about the monthly pension.
The best monthly pension is the immediate annuity.
It is the best one because it's paid immediately at release and
its unreduced monthly pension.
However, to be entitled to that immediate annuity, you need to
meet some criteria.
The most common criteria for the Canadian Armed Forces is the 25
years or more of CF service, which reflects the Canadian
Force service.
When I mentioned 25 or more years, that means 25 years of
full time.
That's why it says on my slide 9131 days.
Some of you could still be entitled to the old provision
which was the 20 years.
You should be aware of your your entitlements.
If you are unsure please you can contact us at the Government of
Canada Pension Center.
Also, you could access the immediate annuity through
another criteria which is the age and the pensionable service.
Minimum 55 years of age with at least 30 years of pensionable
service.
Ultimately speaking, once you hit age 60 and you release, you
will be entitled to immediate annuity, unreduced pension.
These are the regular release.
You would also have the disability release under the
Reserve Pension Plan the Part 1.1 at any age if you have two
or more years of pensionable service.
You could release without a reduction under the Reg Force
Pension Plan the Part 1 full time.
If you have at least 10 years or more of pensionable service at
any age, you could release with no reduction.
The difference between the reserve and the Reg Force will
be the definition of the disability.
Keep in mind that the Government of Canada Pension Center does
not determine the disability release.
This is dealt at DND level.
If you wish to release earlier with the monthly pension, you
could collect your annual allowance which is a monthly
reduced pension.
This monthly reduced pension is payable as early as age 50.
You need to have at least two or more years of pensionable so you
need to be vested into the pension plan.
Because you are collecting your pension before the prescribed
time, you will be reduced on your calculation.
These are the formula to calculate your reduction.
So based on your age and pensionable service, one of the
formulas will be used.
Let's do a scenario.
Let's think of someone who's age 56 with 20 years of pensionable
service.
Because this person is not at least age 60, they are at least
age 55 and don't have the 30 years of pensionable service and
they don't meet the criteria for the 25 years of CF service.
If this person decide to collect their monthly pension, it will
be an annual allowance, monthly reduced.
Because this person has less than 25 years of service, we
will be using the first formula.
First, we will calculate their monthly unreduced pension.
Let's say that amount is $3000 a month.
Applying the monthly reduced formula, the first one 5% * 60
minus their current age which is 56.
This is a 20% reduction of the 3000 monthly pension.
Their monthly pension will be 2400 and it's a reduction for
life.
They're losing $600 a month for life.
However, they are collecting their pension 4 years earlier,
so you have to compare to do that comparison and a better
plan.
If you're not entitled to an unreduced pension at release,
you always have the deferred annuity as an entitlement, which
is the monthly unreduced pension payable at 60.
So you are releasing before age 60 and instead of collecting
your pension with a monthly reduction, you are deferring up
to age 60 and it will be paid to you without reduction.
So if we go back to our previous scenario, a member who's aged 56
with 20 years, their monthly unreduced is $3000, however
payable at age 60.
So they are releasing, they will manage to live working somewhere
else or through their other means of income and they will
get their monthly $3000 payable as of age 60.
Keep in mind that when you opt for the deferred annuity, at any
time you can change your mind and take your monthly pension
reduced as early as age 50.
So example, you decide to take your pension at age 56.
The same formula that we saw earlier will follow you,
however.
Now we will do 60 - 58, which is your current age at time of your
option.
That's a 10% reduction, which is better than a 20% reduction that
we saw earlier.
You have this slide that summarizes all the entitlements
and the options available to you based on your age and years of
service.
If you are unsure of your entitlement and options, please
give us a call at the Pension center.
A pension expert will help you go through your options.
In terms of release process, you have to contact the Pension
Center.
If you know your date of release, we ask you to contact
the Pension Center six months prior to your release.
This way you have enough time to make a proper decision, have
access to your release package, complete all your forms and send
them back to us.
You also need to request your release from your department and
they suggest also a six months prior if possible. Your pension
payments.
Your first monthly pension payment will be done within 45
days of your release date as long as we receive all the
required forms completed.
If not, it will be 45 days from the reception of the last form.
After this, your monthly pension will be paid at the end of each
month.
Direct deposit.
From your monthly pension you will see that some deductions
will continue.
Income tax.
If you have payments for your service buyback or your a leave
without pay that you did not finish paying, it will be
deducted from your monthly pension until they're paid off.
Any debt due to the Crown will also be collected from your
monthly pension. Optionals.
It is your choice to keep the public service health care plan.
It is your choice to keep the pensioner's dental services
plan.
It is your choice to keep the supplementary death benefit,
which is life insurance and pay those monthly premiums.
Any extra income tax you wish to deduct, please let us know, we
can do that for you.
Also, any deductions for SISIP products will continue from your
monthly pension.
Please contact SISIP to see their life insurance products
they offer you post release.
Keep in mind that if you are retiring in Quebec or Ontario,
you will be facing a sales tax for your insurance monthly
premiums.
Other deductions will cease from your monthly pension.
Not that you are retired and you are collecting your monthly
pension.
This means that you are not contributing to your Canadian
Armed Forces pension anymore.
You will not be paying it to disability insurance from your
Canadian Forces pension.
You will not be paying into Employment insurance or CPP
Canada Pension Plan. Indexing.
This is a monthly increase to your pension.
This way you keep up with the cost of living.
It's an annual cost of living increase based on the CPI, the
consumer price index.
Each year statistics Canada will determine the CPI and we at the
Government of Canada Pension Center will be applying that CPI
into your pension.
It is effective every January 1st.
1st increase is prorated based on the full month of release.
The system will be accumulating compounding indexing each year.
However it will be applicable to your monthly pension payable at
age 60 or if you release for disability it will be applicable
the following January.
Any other scenario you need to meet the 85 factor which is age
plus pensionable service equal to 85.
Keep in mind that indexing cannot be payable before age 55
and before meeting 30 years of pensionable service.
Also keep in mind that indexing cannot be delayed after age 60.
Supplementary death benefit.
The SDB.
This is similar to a term life insurance.
Basically the value of your supplementary death benefit is 2
times your pensionable salary.
An example, someone making $80,000, their SDB will be
valued at 160.
They will be paying $0.10 per month for each $1000 of
coverage.
In this scenario, if you are covered for $160,000, your
monthly premiums will be $16.00.
This life insurance will continue automatically.
If you are eligible to a monthly pension immediately within 30
days of release, you will keep the coverage for two times your
salary, keeping the same premiums as the last day of work
up to age 61.
As of age 61, your monthly premiums and coverage will start
to be decreased by 10%.
By age 70, everyone should reach the paid up amount of $5000 and
it remains free of charge until time of death.
Basically it is a decreasing life insurance.
Regular Force members and Reserve Force on Class C will be
participating into this life insurance.
To continue this life insurance post release, you must have been
a participant for a minimum five years continuous at time of
release.
Keep in mind that this amount when payable it won't be taxed
as an income.
However, based on the provinces where you live, you could face
probate fees, which is not the main tax on life insurance.
To designate or amend your current beneficiary, the form
that needs to be completed is the CFFC 2196.
On this form you can designate your estate.
We will make the check payable to your estate and your will
will take over.
You can designate one and only one person aged 18 or over at
time of designation, or you could designate one of these
institutions a charity, religious or educational
institution.
If we have never received a designation form from you and
you are entitled to this supplementary death benefit, the
benefit will be automatically paid to the estate. At time of
death
there also could be survivor benefits. Who are considered as
survivors?
It will be your spouse or your common law partner.
At time of death proof will be required.
If they are recognized as your survivors, they will get a
monthly pension payable for life.
They will get 50% of your monthly benefit.
However, for them to be considered survivor for pension
purposes, the relationship with you must start prior to age 60
and also you must remain in a relationship with this person
until time of death.
The legislation mentions that if you are divorced from your
ex-spouse, that means divorce happened before time of death.
That means your ex-spouse is not entitled to survivor pension. If
you are separated from your common law spouse.
That means separation from common law happened before your
time time of death.
There won't be any survivor pension.
There is also potential of situation where you could have
two survivors where a member was previously married to spouse
number one.
They separated without divorcing.
The members started a common law relationship with spouse #2 and
the member passed. At time of death,
the member had two eligible survivors.
With both the relationships started before age 60 and with
both the relationship continued until time of death.
In this case, the monthly surviving pension will have to
be apportioned between the two spouses.
Children are also entitled to survivor pension.
For a pension purpose a child is considered a child up to age 18
or up to age 25 if full time student.
Under the Regular Force Pension Plan, each child will be getting
10% of the members benefit maximum payable 40% among the
children.
Under the Reserve Force Pension Plan, each child will get 12.5%
of the member's benefit maximum payable 25% between the
children.
If you have children entitled to a survivor pension and there is
no spouse or partner collecting survivor pension in this case,
the child allowance will be doubled.
These are the only eligible survivors for a monthly pension,
a spouse or a common law, children under 18, or between 18
and age 25.
If full time students.
In the scenario that you don't have eligible survivors as per
the previous definition, there could be a minimum benefit.
The minimum benefit is a lump sum payment that is payable when
no eligible survivors for a monthly pension.
This amount will be paid to your designated beneficiary of the
SDB, the supplementary death benefit on the CFFC Form 2196.
If you were not a participant to the SDB or you omitted to
complete the CFFC 2196, the minimum benefit, if any, will be
paid out to the estate and because it reflects the residual
of your pension plan, it will be taxable as an income.
How do we determine if there is any minimum benefit to be paid?
The law says the minimum benefit is the greater of your return of
contribution plus interest or five years of unreduced pension,
less any pension amount already paid out to you or your eligible
survivors.
Once we do this comparison, we will determine if there is any
residual to be paid out.
Let's talk about the public service healthcare plan.
In order to continue this coverage post release, you need
at least six years of pensionable service. Your
family, meaning spouse or common law, and children up to age 21
or 25,
if full time student will continue to be covered with you.
The monthly premiums will depend if you are keeping an individual
coverage or a family and it will also depend on the level of
coverage you are keeping.
The only difference between the level 1, the level 2 and the
Level 3 is the daily hospital provision, meaning how much the
insurance company will be giving the hospital each day.
This way you get an upgraded benefits in terms of room,
hospital room provision.
So level one will get you up to $90.00 extra to have a better
room.
Level two $170, Level three $250 per day for a better room at the
hospital.
Keep in mind that having Level 3 does not necessarily mean you
will get a private room.
It will depend on the availability and the cost of
that private room.
If we receive your application form within 60 days of your date
of release, there won't be any waiting period.
Your health care coverage will be seamless.
If we receive your application form more than 60 days from date
of release your, you will be facing a three month waiting
period,
in order for your coverage to kick in.
Keep in mind that you can change levels, add or remove dependents
also with the waiting period. The pensioner's dental services
plan, your family, spouse, common law and children up to
age 21 or 25 if full time student will continue to be
covered.
Dental coverage must be kept for at least three full calendar
years.
Once cancelled, you cannot reapply to your dental coverage.
Your monthly premiums will depend on the coverage and how
many people are covered with you.
Depending if you are keeping individual coverage, family
(individual plus one) family (individual plus 2 or more
dependents). Same thing.
If we receive your application form within 60 days of date of
release, there won't be any waiting period.
Your coverage will be seamless.
If we receive your application form more than 60 days from date
of release, there will be a waiting period of two months
applicable. Re-enrollment.
Once a Canadian Armed Forces member releases and collecting a
monthly pension, they become annuitant.
Keep in mind that you cannot collect a monthly pension and
contribute to your Canadian Armed Forces pension plan at the
same time.
You can review these scenarios and you can see the impact on
your monthly pension should you re-enroll.
Other topics that could apply to some of you.
I invite you to visit our website or contact the
Government of Canada Pension Centre For more information on
leave without pay or service
Buyback, Disability after retirement,
Pension transfers with public service in RCMP, only applicable
for Part 1 members,
Pension division in case of divorce or separation only
applicable for Part 1 members,
Optional survivor benefit only applicable to Part 1 members.
You do have a list of contact information if you wish to
contact them for more details.
SISIP financial for financial insurance services, Service
Canada for CPP or old age security information,
Quebec Pension Plan for QPP, Public Service Health Care Plan,
Pensioner's Dental Services Plan, Veterans Affairs Canada
and National Association of Federal Retirees.
And finally at the Government of Canada Pension Center, we're
here to help you.
Please contact us through the website or directly over the
phone.
We will be happy to answer you