Transfer Value
When you leave the public service, you may choose to receive the current value of your pension to invest elsewhere for your future retirement. We call this a transfer value.
Instead of a monthly pension, a transfer value is a one-time payout that represents what your pension would be worth at retirement.
Note: Because of the tax and financial implications, you may wish to consult a tax or financial advisor before choosing to receive a transfer value.
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Qualifying for a transfer value
You qualify for a transfer value if you meet these 2 conditions:
- You have at least 2 years of pensionable service.
- You are:
- Under age 50 and started paying into the public service pension plan on or before December 31, 2012, or
- Under age 55 and started paying into the public service pension plan on or after January 1, 2013.
Deadline
You must choose a transfer value within 1 year of terminating your employment in the public service.
How your transfer value is calculated
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Your transfer value amount is the current value of your deferred annuity, according to the pension formula set out by the plan. It’s calculated on the date it’s paid out. The payout date is referred to as the valuation day.
Note: Your transfer value won’t be less than your Return of Contributions.
How rates affect the calculation
Your transfer value is calculated using the interest rates and economic assumptions published by the Canadian Institute of Actuaries in effect on the valuation day. Interest rates play a significant role in determining the present value of your future pension.
These interest rates aren’t the same as typical banking or lending rates. The interest rates used to calculate your transfer value are based on the rates that can be earned from publicly traded bonds. These rates change monthly.
Lower interest rates = higher transfer value
When interest rates are lower, the transfer value is higher. With lower rates, it takes more money today to generate the projected amount of your future pension.
Higher interest rates = lower transfer value
In contrast, when interest rates are higher, the transfer value is lower. With higher rates, a smaller amount is needed today to generate the same return over time.
These calculations make sure that your transfer value accurately represents what your pension is worth at retirement, based on the valuation day.
Other factors that impact the calculation
Several other factors also impact the calculation of your transfer value, including the:
- Demographic assumptions used in the plan’s actuarial report
- Possibility that you may become disabled
- Projected amounts for the survivor benefit and child allowance
- Possibility that you’ll be survived by an eligible spouse and children
How a service buyback affects your transfer value
If you’re buying past service through payroll deductions, your transfer value will only include the service you’ve already paid for.
If you pay off the full or partial balance by the time your transfer value is issued, that service will be included in your transfer value.
Important: Your service buyback payments must be received by the date your transfer value is paid. Any payments made after this date won’t be included in your transfer value.
How a transfer value is paid
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The Income Tax Act sets limits on how much money can be transferred from a registered pension plan into certain tax-sheltered retirement vehicles. As a result, your transfer value will include a tax-sheltered portion but may also include a taxable portion.
Tax-sheltered portion
You must transfer the tax-sheltered portion to:
- another registered pension plan (if the plan allows it),
- a locked-in registered retirement savings vehicle, or
- a financial institution to buy an immediate or deferred life annuity.
Taxable portion
If your transfer value is higher than the limit set by the Income Tax Act, you will receive another portion. This portion will be paid to you in a lump sum and you must pay income tax on this amount.
Note: If you haven’t reached your personal Registered Retirement Savings Plan (RRSP) contribution limit, this portion can be transferred directly to your RRSP. If you choose to do so, you won’t pay income tax until you withdraw money from your RRSP at retirement.
Retirement Compensation Arrangement portion
Part of the transfer value can be covered by the Retirement Compensation Arrangement. If it is, this portion of the transfer value is paid directly to you. You must pay income tax on this amount.
Payment process
In most cases, once the Government of Canada Pension Centre receives your Pension Benefit Options Statement form and any required documents, it will pay out the full transfer value.
Returning to work in the public service
If you were paid a transfer value and return to work in the federal public service:
- Your retirement age will be age 65.
- The pension plan terms after 2012 will apply to all pensionable service you earn while re-employed.
Refer to Re-employment for more information.
In the event of your death
If you die before the transfer value is issued, the full transfer value amount will be paid to your estate, minus tax.
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