Service Buyback—Canadian Armed Forces pensions
The information in this package provides information about elections to purchase prior pensionable service, also known as buying back service, specific to the following audiences:
- Regular Force members who enrolled before March 1, 2007
- Regular Force members who enrolled on or after March 1, 2007
- Reserve Force members in the Reserve Force (Part-Time) Pension Plan (Part I.1)
- Reserve Force members who have qualified for the Regular Force (Full-Time) Pension Plan (Part I)
Service buyback
A service buy-back is a legally binding agreement to purchase a period of prior service and it serves to increase your pensionable service under the Regular Force Pension Plan or your pensionable earnings under the Reserve Force Pension Plan. It may include a period of prior service in the Canadian Armed Forces (CAF), Federal Public Service, Royal Canadian Mounted Police, or Her Majesty's Forces.
To "buy back" previous service means to pay pension contributions for past service for which you did not contribute or for which you received a lump-sum benefit.
When you buy back previous service under the Regular Force Pension Plan, you are adding the service you buy back to your pensionable service. The more pensionable service you have, the bigger your pension will be and it may help you become eligible to retire with an unreduced pension at an earlier date.
When you buy back previous service under the Reserve Force Pension Plan, you are adding pensionable earnings to your credit and increasing your years of pensionable service. Increasing your total earnings provides you with a larger pension and increasing your pensionable service may allow you to retire with an unreduced pension at an earlier date.
The cost for buying back service varies based on the type of service, the benefit you received and when you elect your prior service. There are specific time limits within which you must make your election to count your prior service as pensionable, otherwise the cost may be higher or you may lose the right to elect the service altogether. The type and period of service must be verified before the service buy-back can be approved.
You may accumulate up to a maximum of 35 years of pensionable service.
For specific information about what types of service you can buy back as a Regular or Reserve Force contributor under the Regular Force Pension Plan or as a participant in the Reserve Force Pension Plan, please visit the Active member page, click on the audience specific to your plan, and select the 'Increasing Your Pension' Life Event.
Advantages
The cost for buying back service includes interest either from the year of the service or from the date you were paid a lump-sum benefit, to the date of your decision to buy-back. This means it is cheaper to buy back service sooner rather than later.
Advantages of buying back prior service include:
- Increased pensionable service or pensionable earnings, which increases your pension
- Increased pension benefit for your survivor and children
- The completion of 35 years of pensionable service at an earlier date and
- The possibility of retiring earlier with an unreduced annuity
If you buy back service, the value of your pension benefit increases. Even if you leave the Canadian Armed Forces (CAF) before retirement, the value of your lump sum pension benefit will be greater.
Prior service
Regular and Reserve Force contributors under the Regular Force Pension Plan may buy back
- CAF service for which you received a lump-sum pension benefit
- Reserve Force service during which you did not contribute to the Reserve Force Pension Plan
- service without pay such as maternity and parental leave and
- service in the Federal Public Service, Royal Canadian Mounted Police, or Her Majesty's Forces
Reserve Force Pension Plan participants may buy back
- CAF service for which you received a lump-sum pension benefit
- Reserve Force service during which you did not contribute to the Reserve Force Pension Plan and
- service without pay such as maternity and parental leave
It is important to note that there is a limited period of time in which you may buy back certain periods of prior service. For detailed information about what types of service you are eligible to buy back and the time limits specific to your plan, please visit the Active member page, click on the audience specific to your plan, and select the 'Increasing Your Pension' Life Event.
Costing
The cost for buying back service varies based on the type of service, the benefit you received and when you elect your prior service. There are specific time limits within which you must make your election to count your prior service as pensionable, otherwise the cost may be higher or you may lose the right to elect the service altogether. The type and period of service must be verified before the service buy-back can be approved.
For detailed information as to how much it may cost you to buy back previous service, please visit the Active member page, click on the audience specific to your plan, and select the 'Increasing Your Pension' Life Event.
Tax Implications
Past Service Pension Adjustment Certification
If you make an election to count prior service that took place after 1989, the Income Tax Act (ITA) requires that you have sufficient Registered Retirement Savings Plan (RRSP) contribution room in order for your election to be considered a valid election. If the Canada Revenue Agency (CRA) refuses to certify the Past Service Pension Adjustment (PSPA) amount that is submitted on your behalf by the Government of Canada Pension Centre, your election would be considered invalid, and all past service pension deductions from your earnings would be refunded to you.
The Canada Revenue Agency (CRA) determines each year the amount that you can deposit to an RRSP, based on your earned income during the previous year.
Normally, a direct transfer of funds from your RRSP received prior to the PSPA calculation reduces the amount of the PSPA reported to CRA. If you feel you may not have sufficient RRSP room to allow certification of the PSPA, you may wish to consider paying part of your past service by completing a Direct Transfer of a Single Amount form (T2033) for RRSP transfers.
Deductibility of Registered Pension Plan Contributions
Payments made through a direct transfer from registered vehicles, i.e. regular RRSP, locked-in RRSP, Registered Pension Plans, Deferred Profit Sharing Plans (DPSP) and Locked-in Retirement Account (LIRA) are transferred on a tax sheltered basis. The Income Tax Act (ITA) provides that the amount of such a transfer is not included in calculating an individual's income, nor can that individual claim any deduction for the amount of the transfer.
Estimates
For Regular Force and Reserve Force members who wish to buyback all types of prior service
If you are eligible to buy back prior service and you have access to the Secure Canadian Armed Forces pension web applications, please use the service buyback estimator to estimate the cost of purchasing past service.
If you are eligible to buy back prior service other than Reserve service and you do not have access to the Secure Canadian Armed Forces pension web applications, please contact the Government of Canada Pension Centre.
For Regular Force and Reserve Force members who wish to buyback prior Reserve Service
If you are eligible to buy back prior Reserve service and you have access to the Secure Canadian Armed Forces pension web applications, please use the service buyback estimator to estimate the cost of purchasing past service.
If you are eligible to buy back prior Reserve service and you do not have access to the Secure Canadian Armed Forces pension web applications, please use the Reserve service buyback calculator to estimate the cost of purchasing past service.
Note: There is no functionality on the external Reserve service buyback calculator to provide an estimate of PSSA, RCMPSA or Foreign Service of her Majesty.
You should estimate the cost of buying back service by using either one of the above calculators. Please note that these calculators are only estimators and any final buy-back of service will be based on verified periods of service and rates of pay.
If you are unable to estimate the cost of your service or for help with using these calculators, please contact the Government of Canada Pension Centre.
Note: Before contacting the Government of Canada Pension Centre for help, please visit the Active member page, select the audience specific to your plan, and select the 'Increasing your pension' life event for detailed information and a list of documents that you will need to perform an estimate.
Election Forms
To buy back service:
Regular Force members must complete the following:
- Election to Pay for Prior Pensionable Service (CFSA 100)
- Online calculator/estimator
- Foreign Service (CF-FC 2069): if purchasing Her Majesty's Forces Service
Reserve Force members must complete the following:
- Past Service Election (CF-FC 2438)
- CAF Reserve Service Buy-back Calculator
- Foreign Service (CF-FC 2069): For Regular Force Pension Plan members if purchasing Her Majesty's Forces Service
Please ensure that you clearly indicate your name, Service Number (SN), date of birth, gender, home address, phone number, email address, the period(s) you wish to buy back, the method and required amount of payments. You must also sign and date the form. Keep a copy for your records and forward the original to the address indicated on the form.
For detailed information about how to proceed when making an election, please visit the Active member page, click on the audience specific to your plan, and select the 'Increasing Your Pension' Life Event.
Payments
Lump Sum Payments versus Monthly Installments
You may pay for your service buy-back:
- In a lump sum by paying the full amount
- By monthly installments or
- By a combination of these methods
Cash Lump Sum Payments
Cash lump sum payments such as money orders, certified cheques, and cheques are acceptable methods of lump sum payments.
If the total period of service you chose to buy back is for post-1989 service, the entire amount of the cash payment is fully tax deductible and must be claimed in the tax year it was paid. However, if any or all of the lump sum cash payment is in respect of pre-1990 service, the tax deductibility is limited. Before making a large lump sum cash payment, ensure that you understand the tax deductibility limits applicable to cash payments. Refer to the Tax implications section of this page for further information.
Cash (or money order) payments must be made payable to the Receiver General for Canada. If accompanying the election form, it must be sent directly to the address indicated on that form.
Payments not accompanying the election form must be forwarded directly to the Government of Canada Pension Centre.
Direct Transfer from a Registered Retirement Savings Plan
In most cases, you may pay for prior service by means of transferring RRSP contributions. In order to do so without having income tax deducted, you must complete a Direct Transfer (T2033) form for RRSP transfers. This form is also available from your financial institution or the Canada Revenue Agency (CRA).
Monthly Installments
The monthly installment method includes interest and mortality charges.
If you are a member of the Regular Force, the monthly payment will come out of your pay.
If you are in the Reserve Force, the installments are paid through a Pre-Authorized Debit (PAD) arrangement and taken from your bank account monthly. Your payment plan will include interest at the rate of 4% compounded annually on the unpaid balance. This means that the total cost of the buy-back will be higher and, the longer your instalment period, the higher the overall cost.
Mortality charges are also included. This is a type of life insurance. If you die while your instalments are still being paid, your buy-back is considered paid in full and no further payments are required.
You can at any time decide to make a lump-sum payment. If you do, it will be applied against the total cost to shorten your repayment period.
You may also increase your monthly instalment amount at any time, which will shorten your repayment period.
If you release and are entitled to an immediate annuity prior to paying the cost of your service buy-back in full, the required installments will be deducted from your monthly pension benefit once your service buy-back has been finalized.
For detailed information about how you may pay for your service buy-back, please visit the Active member page, click on the audience specific to your plan, and select the ‘Increasing Your Pension' Life Event.
Please note that the information in this package is intended to provide general information about service buy-back. By selecting the link that is applicable to your audience below, you will find specific information regarding your plan: