Public service pension plan member on or after January 1, 2013

Lifetime pension

When you retire, you will receive a lifetime pension. Your annual lifetime pension is based on your average salary for your five consecutive years of highest paid service and years of pensionable service, as follows:

Bridge benefit

If you retire before age 65, you may also receive a bridge benefit payable until age 65 or until you become entitled to CPP or QPP disability benefits. If you receive early or late CPP or QPP retirement benefits (before or after age 65), your bridge benefit will still stop at age 65 (or earlier if you become entitled to CPP or QPP disability benefits). The bridge benefit is calculated as follows:

Total pension

Your total pension (lifetime pension and bridge benefit), payable until age 65 or until you become entitled to CPP or QPP disability benefits, will be equal to 2 per cent of your average salary for your five consecutive years of highest paid service multiplied by the number of years of your pensionable service.

If you retire at age 65 or older, the bridge benefit is not paid.

Immediate annuity

An immediate annuity is a monthly pension benefit payable immediately if you terminate employment:

• at age 65 or over with at least two years of pensionable service;
• at any age if approved for a medical retirement, with at least two years of pensionable service;
• between ages 60 and 65 with at least 30 years of pensionable service.

Annual allowance

An annual allowance is a monthly pension benefit payable if you are between ages 55 and 65 with at least two years of pensionable service. It is reduced to take into account early receipt of the pension benefit. This reduction is permanent, except if you become disabled and are entitled to an immediate annuity before reaching age 65. An annual allowance is payable from the later of your 55th birthday, date of termination or date of option. It is important to note that if you are 55 years of age or over and wish to receive your annual allowance at date of retirement, your option for an annual allowance must be made prior to your retirement date.

The reduction applied to the pension is calculated according to age and/or service. The reduction is calculated based on one of the following formula:

Deferred annuity

A deferred annuity is an unreduced pension benefit payable at age 65, if you have at least two years of pensionable service.

You must make a pension option within one year of leaving the public service. After one year, if you have not made your option for a benefit, you will be deemed to have opted for a deferred annuity.

Should you choose this option, at any time between age 55 and 65, you may request a reduced pension payable immediately. Please refer to the Annual allowance section above for more details. If you become disabled before reaching age 65, you may be entitled to an immediate annuity, if Health Canada certifies that you are disabled.

Transfer value

If you leave the public service before you reach age 55, you may choose to receive your earned pension benefits as a transfer value lump sum payment rather than as a future monthly pension. A transfer value is a lump sum equal to the value of your future pension benefit (deferred pension). If you choose this option, you must do so within one year of leaving the public service otherwise, you will be deemed to have opted for a deferred annuity. Once the choice is made, the transfer value option is irrevocable.

The rate of return made by funds invested in a locked-in vehicle depends on the rates of return that are available over time in the market place as well as your investment decisions, which will in turn determine the eventual level of income available to you and your dependants. The investment risk is your full responsibility.

If you choose this option, there are no survivor benefits payable under the public service pension plan in the event of your death. In addition, there is no guarantee that the eventual pension income will be equal to the deferred annuity, associated survivor benefits and pension indexing entitlement payable in the future, had the assets been left in the public service pension fund.

Various economic and demographic assumptions are used in the calculation of a transfer value, including net interest rates. These rates vary monthly and the final transfer value amount will be determined as of the date on which it is paid, using the actuarial assumptions in effect on that date. The final amount may differ from a previously estimated amount due to changes in the actuarial assumptions between the date of the estimate and the date of payment.

If you are making service buyback payments, only the service that is paid for up to the transfer value payment date can be included in the transfer value calculation. Therefore, it is important to consider the possibility of paying the balance owing on your service buyback before the transfer value payment date, in order to increase the payment amount.

Any unpaid deficiencies due to a period of leave without pay, as well as any missed service buyback payments, will be recovered from your transfer value payment unless you make payment arrangements before the transfer value is paid.

In accordance with the limits specified in the Income Tax Regulations, a transfer value payment may have three components:

Amount within tax limits

This portion of the lump sum must be moved directly into a Registered Pension Plan (RPP), a locked-in Registered Retirement Savings Plan (RRSP), or a financial institution in order to purchase an annuity.

The amount within the tax limit is calculated as follows: multiply the annual pension payable at age 65 by the age factor at payment date.

In order for the Government of Canada pension centre to issue your payment, you and your financial institution must complete and return the following forms:

• Direct transfer of a single amount under subsection 147(19) or section 147.3 (T2151)
• Certification of lock-in for purposes of the Public Service Superannuation Act or the Pension Benefits Division Act (PWGSC-TPSGC 2347-18)

Amount in excess of tax limits

Where a portion of the transfer value exceeds the tax limit amount, the payment will be made directly to you and that amount becomes part of your taxable income in the year it is paid. If you have sufficient RRSP contribution room, no tax will be deducted on the amount that you transfer to your RRSP.

If you wish to transfer all or a portion of this amount to a RRSP, you must provide us with one of the following documents:

• a) Signed and dated letter certifying that you have checked with the Canada Revenue Agency (CRA) and that you have sufficient RRSP contribution room available. Your letter must also indicate the name and address of your financial institution, your RRSP account number and the specific amount of the payment that is to be transferred to a RRSP; or
• b) Copy of your latest "Notice of assessment" from CRA indicating the available RRSP deduction limit. You must sign and date this notice and also provide us with the name and address of your financial institution, your RRSP account number and the specific amount of the payment that is to be transferred to a RRSP.

Amount under the retirement compensation arrangement

The Income Tax Act places restrictions on the pension benefits accrued per year of service. Pension benefits, which are within the limits allowed under the Income Tax Act, will be paid under the Public Service Superannuation Act, with the remainder being paid from the RCA. The RCA is a plan which provides benefits that exceed the allowable limits for a registered pension plan. If your average salary for your five consecutive years of highest paid service or your projected survivor benefits exceeds the public service pension plan maximum benefit threshold, the transfer value calculation will include an amount in addition to the two amounts described above. This amount would be paid under the RCA, established under the Special Retirement Arrangements Act. The RCA transfer value amount cannot be transferred to a tax-sheltered vehicle; it must be paid directly to you and taxed as required by the Income Tax Regulations.

Medical retirement

You will qualify for a medical retirement if Health Canada certifies that you meet the following definition of disability:

If you retire because of disability at age 65 or older, your benefits will be the same as if you had retired due to age.

If you have to retire because of disability before you reach age 65, you will receive an immediate annuity, unless you have less than two years of pensionable service.

If you become disabled and receive an immediate annuity, but later regain your health and return to work as a plan member, your immediate annuity is terminated and converted to a deferred annuity payable at age 65. If you then wish to convert the deferred annuity to an annual allowance, you may do so at any time after reaching age 55, if you are not employed as a plan member at that time.

Please note that if you become a member of the public service pension plan, your pension will only be payable when you terminate your employment. Furthermore, a medical examination will be required if you wish to retire (for the second time) on medical grounds.

If you wish to pursue retirement for medical reasons, please notify the Pension Centre and they will provide you with further information.

Pension transfer agreement

If you have accepted or plan to accept a position with an employer outside the public service following your termination of employment, you may wish to consider transferring your pension credits to your new employer's pension plan. This can be done if a pension transfer agreement exists between the new employer and the Government of Canada (certain deadlines and restrictions apply). Further information can be found in the pension transfer out section of the Pension portability package or by contacting the Pension Centre.