Frequently Asked Questions - Public Service Pensions Plan

Frequently Asked Questions Feds

Lifetime pension:

1.375% x Years of pensionable service (max 35 years) x Average Salary up to the AMPE

2% x Years of pensionable service (max 35 years) x Average Salary in excess of AMPE

 

Bridge benefit, stops at age 65:

0.625% x Years of pensionable service (max 35 years) x Average Salary up to AMPE

AMPE = Average Maximum Pensionable Earnings, the yearly maximum pensionable earnings set by the CPP/QPP 

for the year of your retirement and the four preceding years.

Bonus does not increase an individual base salary but it is included in the average salary for pension calculation.

Bilingual Bonus and most performance allowances are included in the average salary.  If members would like to know which ones are and which ones aren’t they can go on the Compensation Web Application (CWA)  and do a pension estimate to see if the bonus is included in the average salary or just call the Pension Centre at 1-800-561-7930.

If you only paid into QPP, you will receive QPP no matter which province you reside in.

If you have contributed to both CPP and QPP, you apply to QPP if you are living in Quebec and to CPP if you are living anywhere else in Canada.

CPP and QPP coordinate the payments, as such if you were living in Quebec at the time of your application QPP will coordinate and pay you both portions QPP and CPP, if you were living in Canada but outside Quebec at the time of application, CPP will coordinate and pay you both portions CPP & QPP.

If you are living outside Canada, you apply according to the last province in which you lived.

If you are receiving an individual net income of greater than $79,845 for the year 2021, you have to repay 15% tax on the difference between your individual net income and the $79,845.

And if you receive individual net income greater than $129,757 for the year 2021, you will have to repay 100% of your OAS pension.

If you have a term of six months or less you would not pay into the pension plan, therefore you can receive your pay and your pension at the same time. (make sure there is a break in service before the next term otherwise you fall under the 3rd condition below)

 You are eligible to join the public service pension plan in the following conditions.

As a full-time or part-time public service employee (minimum 12 hours per week), you are eligible to participate in the public service pension plan:

  1. from your first day at work, if you are appointed on an indeterminate basis; or
  2. from your first day at work, if you are hired for a period of more than six months; or
  3. after six months of continuous employment, if you were originally hired for a period of six months or less.

If you start paying in the pension plan again, you revert back to an employee and your pension will cease (you will lose any indexing that was accumulated)

Note 1: Working for the CFSA or RCMPA will have no impact on your pension even if you pay into their pension as they are different pension plans than the PSSA.

Note 2: Summer students that only work 4 months in the summer would not be part of the pension plan.

It depends on the individual’s situation as follows:

Taxes Impact:

  • If participants still have a severance pay coming at retirement and they don’t have RRSP room, they would retire towards the end of the year so that the severance payment is made in the new year. The new year is a retirement year and their retirement income is usually less than their employment income, as such they will be in a lower tax bracket, therefore they would pay less tax.

Indexing Impact:

  • If you retire on the last day of the month, you would lose one month of indexing.  Example: last day of work on May 31, 2022 then you start your pension on June 1, 2022 (indexing start to accumulate the first of the month after you start your pension so it accumulate from July 1, 2022 to December 31, 2022 and you would received 6/12 of the indexing in 2023.  But if you leave May 30, your indexing would be 7/12 in 2023.

Supplementary Death Benefit (SDB) Impact

  • Being compensated 10 days in the month of retirement, they include the $800 bilingual bonus in the calculation of your SDB, so the SDB would be higher if you have a bilingual bonus.

Vacation Pay Impact:

  • Being compensated 10 days in the month of retirement, you would accumulate your vacation credit for that month (most collective agreements)

Lifetime Pension Impact, example:

  • Retirement on December 30, 2021 at age 60 with 20 years of pensionable service with $75,000 average salary:

Pension before 65 = 2% x 20 x 75,000  = $30,000

Bridge = 0.00625 x 20 x 57,780 (AMPE 2021) = $7,222.5

Lifetime pension = $30,000 – $7,222.5 = $22,777.50

  • Retirement on January 2, 2022 at age 60 with 20 years and 3 days of pensionable service with $75,000 average salary:

Pension before 65 = 2% x 20.0082 x 75,000 = $30,012.30

Bridge = 0.00625 x 20.0082 x 59,700 (AMPE 2022) = $7,465.55

Lifetime pension = $30,012.30 – $7,465.55 = $22,546.74

 

As you can see the lifetime pension is bigger if you retire on December 30, 2021 instead of January 2, 2022 because you are using a higher AMPE in 2022

You also need to look at if you reached the Immediate Annuity for the age and service

If someone dies at 34 while working and makes $40,000 per year then we paid double $80,000.  If they die at 50 and make $45,000 we pay $90,000.

If they die after retirement and on the last day of employment they are 60 and their pensionable salary is now $49,600 we round it up to the next multiple thousand, it becomes $50,000 then their coverage becomes $50,000 x 2 = $100,000 from age 60 to 65, If they die at age 66 the coverage is reduced by 10% it becomes $90,000, the coverage gets reduced by 10% each year after that until the coverage becomes $10,000 or they hit the age of 75 and the coverage is $10,000 from age 75 on.

Public servants used to have a severance pay when they retired, this ended in 2010. Any new public service employee after 2010 would not be entitled to the severance. 

Those who accumulated severance before 2010 had the option to cash it out in 2010 at their salary level at that time, they also had the option to wait to receive it at termination.

If they chose to receive their severance pay at termination, their severance would then be based on their salary at termination, which is usually higher.

Those who have yet to cash their severance out, they should contact their compensation advisor for details.