pension-PWGSC-TPSGC-eng by lanyuehua

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									Public Service Pension Plan
   Retirement Planning
   Information Session

    You and Your Pension Plan
Objective


         “ …to help you understand
             the benefits of your
         Public Service Pension Plan”

  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.

                                                            2
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
                                             3
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                               5
www.pensionandbenefits.gc.ca
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)
Election    Salary      Lump     Monthly    Repayment    Total
  Date                Sum Cost    Cost        Period     Cost

Dec. 80    $ 20,017   $ 6, 501   $ 30.05      36 yrs    $ 12,981

Dec. 90    $ 32,128   $ 10,269   $ 56.90      26 yrs    $ 17,753

May 11     $ 50,000   $ 33,029   $ 258.17     20 yrs    $ 61,960

Resultant Benefit:
         0.02 x 4 years x $48,000 ÷ 12 = $ 320.00

                       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
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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

                                                            16
Supplementary Death Benefit



 Did you know that you have
 “life insurance” from your employer?




                                  17
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

                                                   18
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
                                              19
Retirement Benefits



What are my options when I retire?




                                     20
Retirement Benefits
  Two types of retirement benefits:
     •   Lump Sum Payments
          Return of Contributions
          Transfer Value



     •   Monthly Payments
          Immediate  Annuity
          Annual Allowance
          Deferred Annuity           21
Lump Sum Benefit

  Return of Contributions

  Only option available to those with less
  than 2 years of pensionable service
  (not vested).




                                         22
Lump Sum Payment
  Transfer Value Payment
   •   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
                                                 23
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”.
                                                24
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                                  25
Pension Benefits



      How is your pension benefit
              calculated?




                                    26
Benefit Formula (Full-Time)

           Years and days of         Average salary for 5
  2%   X   pensionable service   X   consecutive years of
                                     highest paid service

  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


                                                      27
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



2% X 5 years X $52,934 X 20.0/37.5 =      $ 2,823 per year
                                          $ 235 per month



                                                     28
Benefit Formula (Full-Time and Part-Time)
  Full-Time Service

  2% X 35 years X $ 52,934 X 37.5/37.5 =   $ 37,054 annually
                                           $ 3,088 monthly
  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
                                                       29
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)
                                                   30
Lifetime pension and Bridge benefit

      If you retire before age 65 and apply for CPP/QPP at age 65:
Pension Income




                         Bridge Benefit            CPP or QPP Pension
                 (public service pension plan)

                             Lifetime Pension
                       (public service pension plan)

Retirement                                Age 65
                                                                   31
Monthly Benefits

 What do these terms mean to you?

     •   Immediate Annuity

     •   Annual Allowance

     •   Deferred Annuity


                                32
Monthly Benefits

  Immediate Annuity – (unreduced benefit)

      Age         Pensionable Termination
                 Service Years  Reason
    60 or over     At least 2    Retirement

    55 or over     At least 30   Retirement

    Any age        At least 2     Disability

                                               33
Monthly Benefit

 Immediate Annuity
     •   Payable upon termination

     •   Indexed from year of termination

     •   Supplementary Death Benefit
         coverage is automatic


                                            34
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
                                                          35
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
                                                                     36
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
                                                    37
Monthly Deductions
 Compulsory                        Voluntary
                                    - Supplementary Death
  - Income Tax
                                      Benefit
  - Buyback Instalments             - Canada Savings Bond
  - Provincial Sales Tax            - Income Tax (extra)
                                    - PS Health Care / Dental


                       Cease
                           -   Pension contributions
                           -   Disability Insurance
                           -   EI and CPP/QPP
                           -   Union dues
                           -   Public Service Management
                               Insurance Plan               38
Public Service Health Care Plan
                   Individual Monthly Cost
                    Level 1    Level 2    Level 3
      Employee:     $   0.00   $   1.10   $   5.31
      Pensioner:    $ 21.78    $ 38.34    $ 67.19

                   Family Monthly Cost
                    Level 1    Level 2    Level 3

      Employee:     $   0.00   $   3.53   $ 10.34
      Pensioner:    $ 42.76    $ 59.32    $ 88.17
                                                     39
Pensioners’ Dental Services Plan

       Coverage            Monthly Cost

 Pensioner                  $ 16.00

 Pensioner –                $ 31.96
 plus one dependent

 Pensioner –                $ 47.96
 more than one dependent

                                      40
41
Indexing


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




                                   42
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

                                                43
Month of Retirement   Percentage of Indexing

 January                    11/12
 February                   10/12
 March                       9/12
 April                       8/12
 May                         7/12
 June                        6/12
 July                        5/12
 August                      4/12
 September                   3/12
 October                     2/12
 November                    1/12
 December                    0/12       44
Canada/Quebec Pension Plan Coordination


    How does the CPP/QPP coordination
    affect my pension benefits?




                                      45
CPP/QPP Coordination
                       2012

        SALARY         PSSA    CPP/QPP    TOTAL


   First $3,500        6.2 %    0.000 %    6.200 %
   CPP                          4.950 %   11.150 %
   $3,501 to $50,100   6.2 %
   QPP                          5.025 %   11.225 %


   Over $50,100        8.6 %    0.000 %    8.600 %
                                                  46
Bridge Benefit Formula for 2012
Bridge        Years and days           Lesser of the average
Benefit   X   of pensionable     X     salary or CPP/QPP
Factor        service                  average maximum
                                       pensionable earnings


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


                                                        47
Bridge Benefit Factor

  Year Member will    Year of birth    Bridging
    reach age 65                        Factor
  2007 or earlier    1942 or earlier   .00700
  2008               1943              .00685
  2009               1944              .00670
  2010               1945              .00655
  2011               1946              .00640
  2012 or later      1947 or later     .00625


                                                  48
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                     LESS

               Years and days of         Lesser of the average
    .00625   X pensionable service   X   salary or CPP/QPP
                                         average maximum
                                         pensionable earnings

                                                          49
Bridge Benefit Considerations

 •   Bridge benefit ends effective:

        First of the month following 65th birthday
                        or
        Entitlement to CPP/QPP disability benefits

 •   Application must be made for CPP/QPP benefits

 •   Early retirement benefits available with CPP/QPP
                                                     50
                 Lifetime pension and Bridge benefit
If you retire before age 65 and apply for early CPP/QPP
benefits between age 60 to 64:

                                        Early CPP / QPP Pension
Pension Income




                          Bridge Benefit
                  (public service pension plan)

                             Lifetime Pension
                       (public service pension plan)

Retirement                 Age 60            Age 65
                                                                  51
Effect of Bridge Benefit on Indexing
$ 3,088.00 Monthly pension (retirement age 55)
  x 22 % Indexing rate 10 years later (age 65)
$ 679.36 Monthly indexing increase
            $ 3,088.00 + $ 679.36 = $ 3,767.36
$ 3,088.00   Monthly pension
  - 863.33   Bridge benefit ends at age 65
$ 2,224.67   New monthly pension (age 65)
  x 22 %     Indexing rate
$ 489.43     New monthly indexing increase (age 65)
              $ 2,224.67 + $ 489.43 = $ 2,714.10
             Total effect            - $ 1,053.26


                                                      52
Re-employment after Retirement
•   Pension Benefits

•   Indexing

•   Public Service Health Care Plan

•   Pensioners’ Dental Services Plan

•   Supplementary Death Benefit

•   Contact the Public Service Pension Centre
    at 1-800-561-7930.
                                                53
Survivor Benefits


  What benefits are available for
  my survivors?




                                    54
Survivor Benefits
 • Surviving Partner
      50% of the member’s basic pension
      (1% x years/days of service x average salary)

 • Dependants
     10% of member’s basic pension to each
     child or student (maximum 40%)

 • Orphans
      20% of member’s basic pension to each
      child or student (maximum 80%)
                                              55
Survivor Entitlements

  •   Divorced
         - Partner is not entitled

  •   Separated
         - Partner is entitled

  •   Common Law
         - Must provide proof that relationship
           started prior to retirement
         - Pension Centre must approve
           documentation submitted                56
Optional Survivor Benefits

 •   Marriage occurs after retirement

 •   Option to reduce your own pension to provide a
     benefit for your spouse

 •   Different levels of coverage available

 •   Original pension can be re-instated

 •   Estimate provided by the Public Service
     Pension Centre
                                                 57
Five Year Minimum Benefit


    How and when is a minimum
    benefit paid?




                                58
Five Year Minimum Benefit

   •   Issued when no further benefits payable
       to any survivors

   • Minimum benefit payable is the greater of:
          Return of Contributions plus interest
                             or
          Five years of basic pension benefits
          (less any amount already paid)

                                                  59
Pension Benefits Division Act



  Can my pension be divided?




                                60
Pension Division
 Maximum benefit available to the ex-partner is
 50% of the value of the member’s pension.
  Requirements:
     an agreement or court order must exist

     living apart for at least one year
      (when based on a separation agreement)

     normally cohabitation benefits only are available for
      division (court can order a different period)
                                                         61
Pension Division continued…
 Requirements:
    Lump sum payment transferred to a locked-in
     registered retirement vehicle

    Member’s pension is reduced accordingly

    Either party can request a division estimate

    Non-applicant partner has a 90-day objection period


 For information, contact Public Service Pension Centre

 at 1-800-561-7930.                                   62

								
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