Preparing for retirement - Pension
Congratulations! Retirement is an exciting event in your life; however, it is also a time to make some important decisions. The following information is intended to help you with the process.
You may want to know…
I am planning to retire next year. Should I notify the Government of Canada Pension Centre before my retirement date?
Yes, it is recommended that you contact the Government of Canada Pension Centre six months prior to your intended retirement date to notify them of your intentions and to receive pension related information and instructions. Once you have chosen a retirement date, you should send the Pension Centre a copy of your resignation letter and your manager’s acceptance letter so it can be added to your pension file. This ensures a smooth transition to retirement. The accepted resignation letter should also be sent to the Public Service Pay Centre or your departmental compensation services.
Should I put my retirement plans on hold until the issues with Phoenix have been resolved?
Employees who want to retire should not put their plans on hold. If you are planning to retire within the next 6 months, contact the Government of Canada Pension Centre to start the process.
The Government of Canada takes its responsibilities very seriously and makes every effort to ensure employees receive accurate and timely pension benefits.
If I retire with pay issues, will I still receive my pension benefit?
Employees can still retire even if there have been issues with their pay. The Government of Canada Pension Centre processes the benefit based on the information on file if the member is retiring with a monthly benefit. This benefit would be adjusted retroactively if changes need to be made to the member’s pay record.
In the case of lump sum benefits, such as a Transfer Value or a Return of Contributions, the Pension Centre will begin the payment process once it receives your initial termination documents. When you choose a transfer value, in most cases you will receive 100% of the portion of the transfer value within the limit set by the Income Tax Act in-limit, and no less than 95% of the portion that exceeds this limit. The remaining balance of the transfer value is withheld, to a maximum of $5,000, pending receipt of finalized termination documentation. The Pension Centre will advise you on the expected time to issue the remaining balance. The Pension Centre may exercise discretion in certain exceptional cases. Returns of Contributions are paid in full.
Once I retire, how long will it take before I can expect to receive my first pension payment?
The Government of Canada Pension Centre has service level standards in place for all services, including for receipt of a first monthly pension payment. Once your documentation has been accurately completed and received by the Pension Centre, you can expect to receive a payment within 45 calendar days.
Can I increase my pensionable service prior to retirement?
You may have periods of prior service that you can buy back, periods of leave that can be counted as pensionable service, or service from another employer's pension plan that can be transferred as a way of increasing your pension. Any service buyback must be made before you retire.
If you have not finished paying for an existing service buyback, you will have to continue making payments after you leave unless you choose a transfer value. For more information, refer to the service buyback package.
Is there a special working arrangement where you can reduce your workweek to transition into retirement, but continue to have the non-work days be counted as pensionable service?
Yes, subject to some conditions. If you are eligible to retire with an unreduced pension in the next two years, you may be eligible to apply for pre-retirement transition leave. This is a special working arrangement where eligible employees apply for leave without pay to have their workweek reduced by up to 40 percent. The non-workdays of the working arrangement count as pensionable service under the public service pension plan up to certain limits set under the Income Tax Act. The contributions to the pension plan are deducted based on the unreduced pay rate. Certain conditions apply and you must submit an application to your manager for approval.
To learn more about pre-retirement transition leave and the conditions that apply, please visit the Directive on Leave and Special Working Arrangements and the Leave without pay information package.
What steps should I follow when preparing to retire?
- Step 1: Learn about your pension options.
Options vary depending on your age and years of pensionable service when you leave the federal public service.
If you have at least 2 years of pensionable service, you may be entitled to:
If you have less than 2 years of pensionable service, you may be entitled to:
You may also be eligible to transfer your accrued pension credits to another pension plan through a pension transfer agreement.
Note regarding re-employment: Generally, public service pension plan members who left the federal public service prior to January 1, 2013 and chose:
will continue to be covered under the pre-2013 pension plan terms if they become re-employed in the federal public service on or after January 1, 2013. However, those who left previously and chose a transfer value, received a return of contributions, or chose to transfer their credits to another plan, and became re-employed in the federal public service after January 1, 2013, will have the post-2012 pension plan terms applied to any pensionable service they accrue, and their retirement age will be age 65. For more information, refer to Re-employment.
Visit Public service pension options for more information.
- Step 2: Find out the amount of each of your pension options.
The Secure Pension Tools - Compensation Web Applications Pension Calculator can help you estimate your pension based on the information you enter.
- Step 3: Find out which insurance benefit plans continue after retirement by consulting Preparing for retirement - Public service group insurance benefit plans.
- Step 4: Estimate what your financial requirements will be when you leave the public service. Consult Understanding Financial Needs for additional information.
You may also want to consult a financial and/or tax advisor regarding these pension options and insurance benefits, and their implications on your retirement.
- Step 1: Learn about your pension options.
How do I select a pension benefit option?
As a first step, refer to the Secure Pension Tools - Compensation Web Applications and use the pension tools to estimate a future pension benefit.
Once you have chosen a retirement date, contact the Government of Canada Pension Centre. The Pension Centre will send you a personalized Pension Benefit Options Statement and the required forms. To select your option, you must complete the Pension Benefit Options Statement and return it to the Pension Centre by mail by the deadline provided.
What is the formula for calculating my annual pension benefit?
The public service pension plan provides a lifetime pension payable until your death and, for retirement prior to age 65, a temporary bridge benefit payable until age 65.
Your annual lifetime pension is based on the average of your five consecutive years of highest salary and your years of pensionable service, as follows:
2% × Average salary in excess of the AMPEFootnote 2 × Years of pensionable service (maximum 35 years)
Note: If your pension includes part-time service, the benefits are adjusted to reflect the part-time assigned hours of work compared to the full-time hours of the position.
If you retire before age 65, you may also receive a bridge benefit. The bridge benefit is a temporary benefit that helps to “bridge” your pension until you reach the age of 65, when the Canada Pension Plan/Quebec Pension Plan (CPP/QPP) is expected to begin. However, the bridge benefit will stop immediately if you become entitled to a CPP/QPP disability pension. The bridge benefit is calculated as follows:
Note: If you have not reached the required age or years of service to retire with an unreduced immediate annuity but are entitled to an annual allowance, your deferred annuity calculated using the above formula will be reduced to account for the fact that you would be receiving benefits for a longer period of time.
Why does the bridge benefit under the public service pension plan stop at age 65?
The bridge benefit is a temporary benefit that helps to “bridge” your pension until age 65, which is normal retirement age under the Canada Pension Plan and Quebec Pension Plan (CPP/QPP). However, the bridge benefit will stop immediately if you become entitled to a CPP/QPP disability pension. More information can be found in Canada Pension Plan/Quebec Pension Plan coordination.
Is my pension benefit protected from losing its value as a result of inflation?
Yes. Indexation ensures that your pension benefit will be protected from the effects of inflation and annual increases in the cost of living. The indexing of public service pension plan benefits is governed by two pieces of legislation; the Public Service Superannuation Act and the Supplementary Retirement Benefits Act. Pension increases for retired members and their survivors and eligible children are calculated each year using Consumer Price Index data published by Statistics Canada. A deferred annuity is indexed as of the most recent date you leave the public service. Details are available at Indexing rate – Retired members – Pension.
The adjustments usually begin on January 1 following the year of retirement and take effect each year after that. The first indexing amount will be prorated to reflect the number of full months remaining in the year following the month in which you retired. In subsequent years, you will be entitled to the full annual increase.
Example: If an employee retires on August 20, in January of the following year he/she would be entitled to a pension adjustment based on 4/12th of the Consumer Price Index (for September to December).
Could reemployment affect my pension benefit?
If you become re-employed in the public service and begin contributing to the public service pension plan, your monthly pension (including indexing) will cease. This is because you cannot receive a pension and accumulate pensionable service under the public service pension plan simultaneously. Once you retire again your pension and indexing benefits will be based on your new retirement date as well as your updated years of service and latest salary. You will lose any previous indexing which may have accumulated on your pension. For more information on the effects of re-employment, refer to Re-employment after retirement – Retired members – Pension.
What happens if I have not finished paying my pension contributions for my existing service buyback or my period of leave without pay when I retire?
If you have an existing service buyback that is not fully paid and choose to receive an annual pension benefit, you must continue making the required payments after you leave. For more information, refer to the Service buyback package.
If you choose a transfer value, any balance remaining on your buyback election must be paid prior to valuation day to have the corresponding service included in the calculation of your transfer value. Please consult Transfer Value for more information.
Any pension and Supplementary Death Benefit contributions still owing for a period of leave without pay must be paid. Contact the Government of Canada Pension Centre for information on payment options for these contributions.
If I have granted someone a Power of Attorney, can that person manage my pension affairs?
If you want someone to manage your pension affairs on your behalf, an original, notarized, or a certified true copy of the Power Of Attorney (POA) document bearing the original signature of the individuals prescribed under your province’s legislation (which could be a lawyer, notary, commissioner of oaths or justice of the peace) must be sent to the Government of Canada Pension Centre. In order to protect plan members, the Pension Centre cannot accept photocopies, faxes or scans of supporting legal documents. Original POA documents will be returned to you by mail.
The person you name can then request address changes, enroll in direct deposit and choose a benefit on your behalf. However, a POA does not allow that person to change the recipient of a pension benefit or to change a beneficiary under the Supplementary Death Benefit plan.
If you want to allow someone to make enquiries and receive information about your pension matters, but not make decisions on your behalf, you can provide the Pension Centre with a written consent to that effect.
Please contact the Government of Canada Pension Centre directly to discuss the documentation required to have someone manage your affairs.
Visit Preparing for retirement - Public service group insurance benefit plans for information on benefits.
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