Public service pension options

Table of Contents

• Retirement Age
• Layoffs
  • Pension Eligibility at Age 60 - Workforce Adjustment and Pension Waivers
  • Pension Eligibility at Age 65 - Workforce Adjustment and Pension Waivers
• A Deferred Annuity, an Annual Allowance or a Transfer Value … How to Choose
• Understanding Financial Needs
• Things to Consider...

Pension Options

• Immediate Annuity
• Deferred Annuity
• Annual Allowance
• Transfer Value
• Return of Contributions

Retirement Age

The date when you became a member under the public service pension plan determines when you will be eligible to receive an unreduced pension benefit:

• If you become a member on or before December 31, 2012, you are eligible for an unreduced pension at age 60 with at least two years of pensionable service (or age 55 with 30 years of service); or,
• If you become a member on or after January 1, 2013, you are eligible for an unreduced pension at age 65 with at least two years of pensionable service (or age 60 with 30 years of service).

If you are a Correctional Service Canada employee, some other Operational Service Provisions may apply.

Layoffs

If you resigned or were laid off as a result a workforce adjustment (WFA) or an employment transition before you were eligible to receive an unreduced pension benefit, the following options may be available to you:

• A deferred annuity;
• An annual allowance; or
• A transfer value.

In general, if you retire before meeting the age and service criteria set by the pension plan, you are entitled to an annual allowance (a reduced pension). Because you were laid off under a WFA or an employment transition, you may be eligible to have the pension reduction waived from your annual allowance.

To qualify for the early pension waiver, you must be within five years of the age of eligibility for a pension, have two or more years of pensionable service and have been employed in the public service for one or more periods totaling at least 10 years.

If you became a member of the public service pension plan on or before December 31, 2012, visit:

• Pension Eligibility at Age 60 – Workforce Adjustment and Pension Waivers.

If you became a member of the public service pension plan on or after January 1, 2013, visit:

• Pension Eligibility at Age 65 – Workforce Adjustment and Pension Waivers.

A Deferred Annuity, an Annual Allowance or a Transfer Value … How to Choose

Depending on when you leave the public service, you may be entitled to more than one type of the following benefits:

• Immediate annuity: monthly pension payable immediately
• Deferred annuity: monthly pension payable at a later set date
• Annual allowance: permanently reduced monthly pension payable immediately
• Transfer value: one-time lump-sum payment
• Return of contributions: one-time lump-sum payment

Before making a choice about your pension, make sure you evaluate the pros and cons of each option. Here are a few considerations you may want to take into account:

• If you are interested in a deferred annuity, you should estimate the long-term value of the benefit and compare it to an annual allowance.
• In the event of death at an early age, an annuity is less advantageous than a transfer value. An annuity provides a monthly lifetime pension, while a transfer value provides a one-time lump sum benefit.
• If you choose a transfer value, you bear the investment risks and tax implications once the money is transferred out of the plan.
• If you become re-employed in the public service and begin contributing to the pension plan again, you may be able to buy back the previous period of service for which you received a transfer value.

These are just a few considerations you may want to evaluate. Since the choice of pension benefit is an important decision, you may want to consult your financial advisor before making a decision.

Understanding Financial Needs

Estimating your future pension in order to compare your options is a key step in choosing the benefits that are right for you. Using your Pension and Insurance Benefit Statement and the Pension Calculator within the Compensation Web Applications (accessible only on the Government of Canada network), calculate your future pension with different years of pensionable service and different average salaries.

For example, if you are interested in an annuity, you should estimate the long-term value of a deferred annuity and compare it to an annual allowance, which is reduced but payable immediately. Depending on your situation, you could gain by choosing an annual allowance.

You must choose a pension option within one year of leaving the public service. If you do not make a choice within that time limit, you are deemed to have opted for a deferred annuity.

To ensure that you are making an informed decision, you may also want to consult the following:

• The Government of Canada Government of Canada Pension Centre. A pension expert can provide you with information and assistance.
• The Canada Revenue Agency. The tax consequences that apply to pensions are a major consideration in your retirement planning.
• Your personal financial advisor.

Things to Consider...

Most likely, your public service salary is currently your main source of income. Your budget consists of your employment income minus your total expenses. Those expenses include work-related expenses (transportation, clothing, lunch, etc.), fixed expenses (home, insurance, rent, food, etc.) and other expenses (professional fees, health care, recreation, unforeseen expenses, etc.).

In order to make the right choice of option when you retire, it may be useful for you to estimate your financial requirements after you leave the public service. You first need to decide what you plan on doing when you retire. Are you going to participate in activities such as travelling, sports, school, etc.? Are you going to work? Will you work full-time, part-time or just occasionally?

When you have an idea of what your lifestyle will be, you will be able to estimate a provisional retirement budget and determine whether your future income–public service pension plan, Canada Pension Plan or Quebec Pension Plan, registered retirement savings plan, Old Age Security, savings, etc.–will be enough to cover your future expenses.

When you calculate your benefits, remember that:

• Retirement benefits are taxable;
• The bridge benefit portion of your public service pension will stop at age 65; and
• Your needs will change with age.

You might also want to consider your life expectancy when determining how long you will need your pension income. Refer to the life expectancy table below as an indicator, but remember that these figures represent approximate averages that do not take into account your personal situation such as your state of health, your heredity, your lifestyle and your activities.