Increasing your pension—Reservists in the Regular Force Pension Plan

Pensionable service is used

• to determine what type of pension benefit you receive at release (unreduced pension, reduced pension, deferred pension, etc.)
• in the pension formulas, to calculate how much pension you receive at release and
• to determine how much your pension is reduced, if you release and are eligible for a reduced pension

Pensionable service includes

• the period of service when you contributed as an active member of the Regular Force Pension Plan
• any service you buy back and
• any service you transfer from the Federal Public Service - Public Service Superannuation Act (PSSA) - or the Royal Canadian Mounted Police (RCMP) - Royal Canadian Mounted Police Superannuation Act

If you bought back Reserve Force service

The full period you were eligible to buy back counts as pensionable service towards the type of pension benefit you receive at release and the early retirement reduction, but only the service you pay for will count in the pension formula.

Canadian Forces Service is used

• to determine when you join the Regular Force Pension Plan; and
• to determine if you are eligible for an unreduced pension at release

Canadian Forces Service includes

• days of service in the Regular Force for which you are paid
• days of service in the Reserve Force for which you are paid:
  • days of training or duty of fewer than six hours count for 0.5 days
  • days of Class "A" service count for 1.4 days and
  • periods before 1 April 1999, when the length of the period can be verified but not the number of days, each day of the period counts as 0.25 of a day and
• Service without pay for maternity or parental reasons, whether or not you contributed for that period or bought back that service

Yes. The maximum is 35 years of pensionable service.

You stop accumulating pensionable service and your contributions decrease to 1% of your pensionable earnings. Your average earnings – used in the pension formulas – include any salary you earn after completing 35 years of service, if that salary is the highest.

This means that, even though you no longer accumulate pensionable service, your pension increases if your average earnings increase.

To buy back previous service means to pay the amount for past service for which you did not contribute or for which you received a lump-sum benefit.

When you buy back previous service, 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.

Buying back service increases your pensionable service, which in turn:

• increases your pension
• may help you become eligible for an unreduced pension at an earlier date
• may mean a smaller reduction in your pension if you do not meet the requirements for an unreduced pension when you release
• may provide for earlier indexing of your pension payments
• may allow you to reach 35 years of pensionable service faster and
• provides a larger pension for your survivor and children after your death

Refer to the Scenarios to see examples of the impact of buying back past service.

If you were first a member of the Reserve Force Pension Plan and then joined the Regular Force Pension Plan, you have a one-time opportunity to pay to 'top-up' the contributions you paid while you were a member of the Reserve Force Pension Plan.

The contribution rate under the Reserve Force Pension Plan is lower than the rates under the Regular Force Pension Plan. While you were a member of the Reserve Force Pension Plan, you contributed at a lower rate and, if you bought back previous Reserve or Regular Force service while you were a member of the Reserve Force Pension Plan, the cost was based on the lower contribution rates. Topping up means, paying the difference in the contribution rates between the two pension plans for those periods of service.

In calculating the amount of your pension according to the pension formula, an adjustment is applied to take into account if you chose to pay less than the full cost of your top-up or if you chose not to top-up.

Topping up:

• increases your pension and
• provides a larger pension for your survivor and children after your death

Refer to the Scenarios to see examples of the impact of topping up service.

Even if you're a long way from retirement, planning and saving for retirement is a good idea.

• There is a strict deadline to buy back Reserve Force service and to top-up your contributions. You may not have a second chance to buy back this service or top-up after that. It is important that you examine your options now
• If you buy back service with the Regular Force, Royal Canadian Mounted Police (RCMP), Federal Public Service or Her Majesty's Forces (other than Canada) within one year of joining the Regular Force Pension Plan, you don't have to pass a medical exam
• The cost for buying back service with the Regular Force, RCMP, Federal Public Service or Her Majesty's Forces (other than Canada) takes into account 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
• If you buy back service, the value of your pension benefit increases. Even if you leave the Canadian Armed Forces before retirement, you'll have more money saved for retirement

You may be able to increase your pension by adding to it your previous service with:

• the Regular Force for which you received a lump sum
• the Federal Public Service
• the Royal Canadian Mounted Police (RCMP) or
• Her Majesty's Forces (other than Canada)

There are two ways to include previous service:

• Buying back service – certain periods of service are eligible for a buy-back. You pay to have the service recognized as pensionable service
• Transferring pension credits – if you are entitled to a refund of contributions, a deferred pension, or are receiving a pension from the Federal Public Service or the RCMP, you can give up the right to that benefit and transfer it to the Regular Force Pension Plan to include it with your pensionable service

The decision of whether or not to include your previous service is important, and may have an impact on your future retirement income. The decision is up to you. You are responsible for informing the Government of Canada Pension Centre if you want to buy back past service or transfer pension credits.

You should have already been notified if you were eligible to buy back previous Reserve Force service. You may have already started or completed the process to buy this service back. If you have not, it is important to take the time to consider it before the deadline.

You can buy back prior service as outlined below.

The following table represents the types of service you can buy back:

If you are entitled to a deferred pension or are receiving a pension from the RCMP or the Federal Public Service, you can give up your pension entitlement and transfer your pension credits – with some limitations – from that plan to the Regular Force Pension Plan.

For more information, please contact the Government of Canada Pension Centre.

Reserve Force service

No. Once you are eligible to buy back, you have a strict deadline by which you can buy back Reserve Force service.

The Government of Canada Pension Centre sends you a Notification of Plan Membership (CF-FC 2018) indicating when you are eligible to purchase your previous service. You must buy back within one year after the date of this notification.

If you have not already carefully considered whether or not to buy back your previous service, you should carefully consider it now. You have a strict deadline to buy back this previous service.

If you miss this deadline, you lose the right to buy back the previous service. Please note that the Government of Canada Pension Centre will not send out a letter advising that the deadline has been missed.

Refer to the Scenarios to see examples of the impact of buying back past service.

Previous service with the Regular Force, Royal Canadian Mounted Police, Federal Public Service and Her Majesty's Forces (other than Canada)

You can choose to buy back previous Regular Force service, service that was eligible for buy back under the Royal Canadian Mounted Police or Federal Public Service, or service with her Majesty's Forces (other than Canada) anytime before you are released from the Canadian Armed Forces. The cost for buying back service takes into account interest 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. Since this will increase with time, it is cheaper to buy back service sooner rather than later. If you buy back service later than one year after joining the Regular Force Pension Plan, you must pass a medical exam.

If you choose to buy back service with the Regular Force, Royal Canadian Mounted Police, Federal Public Service or Her Majesty's Forces (other than Canada) more than one year after you join the Regular Force Pension Plan:

• you must pass a medical exam and
• the cost of the buy-back will take into account your rate of pay when you chose to buy-back

This means it is cheaper to buy back service sooner rather than later.

That depends on the service, as follows:

Previous Regular Force service

You pay:

The lump-sum benefit paid to you at release + 4% simple interest (calculated from the date of the original payment to the date of your decision to buy back that service)

Previous Reserve Force service

You pay:

Pensionable earnings in the calendar year of the service, updated to the year of your decision to buy-back x Reserve Force Pension Plan contribution rate in the year of your decision to buy-back  + 7% interest compounded annually, calculated from the middle of the year that you bought back to the date of your decision to buy back that service +  difference between contributions from the Reserve Force Pension Plan and the Regular Force Pension Plan, if any

Previous eligible service under the Royal Canadian Mounted Police or Federal Public Service

The cost depends on whether or not you are buying back service for which you contributed to the previous pension plan.

The following table demonstrates how the cost of your buy back is calculated based on whether or not you contributed under the previous pension plan:

If you are entitled to a deferred pension or a refund of contributions, or you are receiving a pension from the Royal Canadian Mounted Police or the Federal Public Service, you can give up your pension entitlement and transfer your pension credits from that plan to the Regular Force Pension Plan.

Previous service under Her Majesty's Forces (other than Canada)

Contact the Government of Canada Pension Centre for a quote on the cost to buy back this service.

The rules for buying back Reserve Force service were developed in the course of extensive consultation with Canadian Armed Forces (CAF) members, CAF chain of command, officials in the Treasury Board Secretariat and others. In setting the cost to buy back service, the appropriate balance had to be struck to take into account two important factors:

• there is no limit for buying back Reserve Force service – members can have all their past service recognized if they wish and
• members need to pay a balanced share of the long-term cost to the pension plan that is created by buying back past service

You pay the difference between contributions for the Reserve Force Pension Plan and the Regular Force Pension Plan for the period of service while you were a member of the Reserve Force Pension Plan and the difference in the contributions for any earnings you bought back.

Yes. When you join the Regular Force Pension Plan, the Government of Canada Pension Centre sends you a notification indicating you are eligible to top-up. You must top-up no later than one year after the date of this notification.

If you miss this deadline, you lose the right to top-up. If you have not yet received this notification and believe you should have, contact the Government of Canada Pension Centre.

If you choose to buy back previous service and/or make a top-up election, you have three payment options. You can pay by monthly deductions from your salary, lump sum payment(s), or a combination of these payment methods. Please note that you may make additional payments at any time. Refer to the Service Buyback Package section for additional information on payments.

You may pay in either or both of the following ways:

Lump Sum

You may pay by cheque or by a direct transfer from your Registered Retirement Savings Plan (RRSP) or a Registered Pension Plan (RPP).

In order to make a direct transfer from your Registered Pension Plan without having income tax deducted, you must complete a Transfer of a Single Amount (T2151) form. This form is available from the administrator of your former pension plan or from the Canada Revenue Agency (CRA). The T2151 should be forwarded along with the Past Service Election Form (CF-FC 2438) form to the address indicated on that form. Upon receipt of your election form, the Government of Canada Pension Centre will contact you concerning this payment option. The Reserve Force Buyback (CF-FC 2438) form must be forwarded with seven days of the date of signature.

Monthly life-insured instalments

• You may make payments in instalments until age 65 or for 20 years, whichever is longer. The instalments are paid by way of a pre-authorized debit (PAD) arrangement with your bank
• If you choose monthly instalments, 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 die while your instalments are still being paid, your buy-back is considered paid in full and no further payments are required
• Keep in mind that, if you choose to pay in monthly instalments, you will also be paying 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. Be sure to carefully consider your payment options when making your decision

When you buy back prior service, you increase your pensionable service, which increases your pension benefit. Once you make the decision to buy back, the pension plan assumes the obligation to provide an increased pension benefit to you and to your survivor and children. And, the plan is responsible for the larger portion of the cost of the increased benefit. Furthermore, you do not have to pay your buy-back in full right away. You can choose to pay in instalments until age 65 or for 20 years, whichever is longer. If you die before you have finished paying for your buy-back, it is considered to be paid in full.

If you choose to buy back service in the Regular Force, Federal Public Service, Royal Canadian Mounted Police or Her Majesty's Forces (other than Canada) more than one year after you join the Regular Force Pension Plan, you have to pass a medical exam within 90 days before or after the date of your election to buy back your prior service. The exam certifies that you are mentally and physically fit to perform your duties.

The requirement to pass this exam protects the government – and other pension plan members – against a substantial financial burden in the event that members who are not physically and/or mentally fit may die prematurely and increase the plan's financial obligations.

Have your medical officer complete section 5 of the Past Service Election (CF-FC 2438) form. If your medical officer does not complete this section, your request to buy back service will be invalid.

Every year, a formula established by the Canada Revenue Agency (CRA) is used to estimate the value of your pension under the pension plan. The result of this calculation – called a Pension Adjustment (PA) – reduces your Registered Retirement Savings Plan (RRSP) contribution room in the next year. Your PA appears on your tax slip every year. PAs were first introduced in 1990.

However, when you buy back service, you "earn" extra pension for those years in the past. As a result, the CRA considers that your past PAs have been too small and that you received too much RRSP room. The CRA will make an adjustment to your PAs for each year of the buy-back after 1989. The total of the extra PAs is called a Past Service Pension Adjustment (PSPA).

The service you are able to buy back depends on your RRSP contribution room. You can find your RRSP contribution room amount on your annual Notice of Assessment from the CRA. If your RRSP room is less than the PSPA, you may have to take some money out of your RRSP as taxable income to make more room. One way to pay for a buy-back is by transferring money from your RRSP. If you do this, it will reduce your PSPA.

The rules concerning PAs, PSPAs and tax deductibility are complex. If you are buying back service that covers a period of several years, consider consulting a tax specialist. You can also contact the Canada Revenue Agency for more information.

If you are buying back:

Previous Reserve Force service

• Before you begin please contact your unit base orderly room to obtain records of your past service
• Consider consulting a financial advisor for help in determining whether to buy back service and the best payment method
• Estimate the cost of buying back service by referring to the Service buyback package section "Estimates"
• Complete the buy-back form called Past Service Election (CF-FC 2438)
• Complete the Pre-authorized debit (CF-FC 2444) form if you wish to pay for your buy-back in monthly instalments
• Complete the Lump-sum payment section of the election form if you wish to pay for your buy-back by cheque or money order
• Complete the Direct Transfer (T2033) form if you wish to pay for your buy-back by transferring a lump sum from your Registered Retirement Savings Plan or complete the Transfer of a Single Amount (T2151) form to transfer from your former Registered Pension Plan
• Return all the necessary forms and your cheque or money order, if applicable, to the Government of Canada Pension Centre

Service with the Regular Force, the Federal Public Service, Royal Canadian Mounted Police or Her Majesty's Forces (other than Canada)

• Consider consulting a financial advisor for help in determining whether to buy back service and the best payment method
• Estimate the cost of buying back service by referring to the Service buyback package section "Estimates"
• Complete the Past Service Election (CF-FC 2438) form, and return it to the Government of Canada Pension Centre
• If you are buying back Foreign Service (Her Majesty's Forces), please complete the Foreign Service (CF-FC 2069 form)
• If you are buying back service later than one year after you joined the Regular Force Pension Plan, you need to pass a medical exam to buy back the service and you must have your medical officer complete Part 5 of the Past Service Election (CF-FC 2438) form. If your medical officer does not complete this section, the Government of Canada will send you the Evidence of Medical Examination (CF-FC 2081) to be completed and returned within the prescribed timeframe

• Estimate the cost of your top-up and the amount of extra pension it would provide by using the Reserve Force Buyback Calculator
• Consider consulting a financial advisor for help in determining whether to top-up and the best payment method
• Complete the Past Service Election (CF-FC 2438) form
• Complete the Lump sum payment section of the election form if you wish to pay for your top-up by cheque or money order
• Complete the Direct Transfer (T2033) form if you wish to pay for your top-up by transferring a lump sum from your Registered Retirement Savings Plan or complete the Transfer of a Single Amount (T2151) form to transfer from your former Registered Pension Plan
• Return all the necessary forms and your cheque or money order, if applicable, to the Government of Canada Pension Centre

No. You can only cancel a buy-back or top-up if you received erroneous or misleading information, in writing, from someone who is authorized to give pension information and you chose to buy back service based on that information. In this case, you receive a refund of the payments you have already made and no future payments are required. However, you can stop making future payments for your buy back or top-up if you can show that the cost of the buy-back or top-up causes you undue financial hardship which was unforeseen when you made the choice to buy back service or top-up.

In the event of financial hardship, you may be able to revoke your election for prior service in whole or in part. "In part" means that if you have elected more than one period of service, you may be entitled to revoke the period of service most recent in time.

Please contact the Government of Canada Pension Centre for more information.

No.

Yes, you can change your mind about the method of making the payment. You can at anytime pay a lump sum for a part of the balance still owed for the buy-back which will shorten the repayment period. And, you can at anytime pay the full balance owed. However, if you have made a lump-sum payment, you cannot reverse that decision.

Transferring pension credits means moving your pension entitlement from the Federal Public Service or the Royal Canadian Mounted Police (RCMP) pension plans to the Regular Force Pension Plan and having it count as pensionable service.

You can transfer pension credits if you are entitled to a deferred pension or a refund of contributions from the Federal Public Service or the Royal Canadian Mounted Police (RCMP). To transfer the credits, you would have to give up your right to the refund of contributions or to the future (deferred) pension under the other plan.

You can also transfer pension credits if you are receiving a pension from the Federal Public Service or the RCMP. In this case, you would stop receiving your pension and give up the right to the pension in order to have the pension credits transferred.

Transferring your pension credits increases your pensionable service which, in turn:

• increases your pension
• may help you become eligible for an unreduced pension earlier
• may mean a smaller reduction in your pension, if you don't meet the requirements for an unreduced pension when you release;
• may provide for earlier indexing on your pension payments
• may allow you to reach 35 years of pensionable service faster and
• provides a larger pension for your survivor and children after your death

In some cases, it may not be worthwhile to transfer your pension credits. You should weigh your options carefully before making your decision.

Yes. You must make the decision to transfer your pension credits within one year of joining the Regular Force Pension Plan.

No. There is no cost to transferring pension credits, unless you are making monthly instalments to buy back past service under the previous pension plan. If you are, you would continue to make these payments to the Regular Force Pension Plan to have the full service added to your pensionable service.

The decision of whether or not to transfer your pension credits from the Federal Public Service or the Royal Canadian Mounted Police (RCMP) is a personal one and depends on many factors. You may wish to consult an independent financial advisor before making the decision.

The following table contains some of the questions you may wish to ask yourself if you're thinking about transferring your pension credits:

• Consider consulting your financial advisor for help in determining whether a transfer of pension credits is the right option for you
• Contact the Government of Canada Pension Centre if you are interested in transferring your pension credits