Glossary—Reserve Force members in the Reserve Force (Part-Time) Pension Plan
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Topic beginning with the letter A
- Annual allowance
- See reduced pension.
- A form of regular retirement income. Also known as pension.
- Average Year's Maximum Pensionable Earnings
- The average of the Year's Maximum Pensionable Earnings (YMPE) for the year in which you stop participating in the pension plan and the four years before that.
Topic beginning with the letter B
- Bridge benefit
The bridge benefit is an additional pension paid to ensure a stable retirement income and is paid from the day of retirement until age 65, when replaced by a Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) retirement pension.
The bridge benefit is paid to Canadian Armed Forces (CAF) members and is indexed at the same rate as the lifetime pension. When the payment of the bridge benefit ends, the indexing that has been applied to the bridge benefit also ends.
If you begin to receive a CPP or QPP disability pension before age 65, you are no longer eligible for the bridge benefit and must inform the Government of Canada Pension Centre, so they can discontinue the bridge benefit. Any overpayment that has been made will be recovered.
Topic beginning with the letter C
- Canadian Forces (CF) service
CF 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
CF 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 (service in the Reserve Force is calculated based on your service in the 12-month period before your leave)
- Child allowance
- See child pension.
- Child pension
The monthly pension payable to your eligible child or children at your death. Under the Reserve Force Pension Plan, a pension is payable to your eligible child if you have two or more years of pensionable service at your death.
Also known as child allowance.
Your child(ren) include an adopted child(ren) or stepchild(ren), born before you reached age 60 or stopped being a member of the plan, whichever happens later, and who is/are:
- younger than age 18 or
- between ages 18 and 25, and in full-time attendance at a school, college, university or other educational institution that provides training or instruction of an educational, professional, vocational or technical nature
- Compounded interest
- Compounded interest is interest paid on the principal balance owing, as well as the accumulated interest.
Topic beginning with the letter D
- Deferred annuity
- See deferred pension.
- Deferred pension
A deferred pension is a pension that you start receiving at a future date, rather than at release. Under the Reserve Force Pension Plan, if you release before age 50 with at least two years of pensionable service and you do not meet the criteria for an unreduced pension, you are eligible for a deferred pension.
The deferred pension:
- is the amount of pension you have earned at release, calculated according to the pension formula
- is indexed for inflation from the time you release
- includes an immediate pension to your eligible spouse or children in the event of your death
- includes a lifetime pension and a bridge benefit; the bridge benefit is paid from the time you begin receiving your pension payments until age 65 and
- is paid unreduced at age 60, or with a reduction any time at or after age 50. The longer you wait to start receiving the deferred pension, the smaller the reduction will be, but you will receive the payments over a shorter period of time
If you choose a deferred pension, you will be eligible for benefits under the Public Service Health Care Plan and under the Pensioners' Dental Services Plan when you start your pension.
Also known as deferred annuity.
In 2009, Jean releases at age 36 with 15 years of pensionable service and total updated earnings of $172,000. Jean is eligible for a deferred pension, paid unreduced at age 60. Or, Jean can choose to receive a reduced pension anytime at or after age 50. The average Year's Maximum Pensionable Earnings in 2009 is $43,620. But, because Jean's updated earnings for each year were lower than average YMPE, the calculation doesn't take the average YMPE into account. Here's what Jean's monthly pension would be at different ages:
At age… 52 55 58 60 Jean's monthly lifetime pension would be… $129 $161 $193 $215 Jean's monthly bridge benefit would be… $43 $54 $64 $72
For the purposes of the Reserve Force Pension Plan, you are considered disabled during your active service if you suffer from a mental or physical impairment that:
- prevents you from engaging in any employment for which you are reasonably suited by virtue of your education, training, or experience and
- can reasonably be expected to last for the rest of your life
Topic beginning with the letter E
- Refers to the choice to buy back previous service.
Topic beginning with the letter I
- Immediate Annuity
Also known as unreduced pension
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- Life-insured instalments
The payments you make to buy back prior service, the cost of which includes:
- the amount required to purchase the service
- the cost of life insurance and
- interest on the unpaid balance
In the event of your death, your buy-back is considered fully paid and your spouse or estate have no more payments to make.
- Locked-in retirement plan
A registered plan in which funds remain sheltered from tax until they are withdrawn as retirement income.
You can unlock a portion of the money in your locked-in account, if you are:
- age 55 and older; or
- facing financial hardship because of:
- low income (less than 75% of the Year's Maximum Pensionable Earnings) or
- medical or disability-related costs that exceed 20% of your annual income
If you are considering transferring the value of your pension, consult a financial advisor for more information on the unlocking provisions.
Topic beginning with the letter M
- Minimum death benefits
Under the pension plan, there is a minimum benefit guaranteed when no eligible spouse or children exist. If you have two or more years of pensionable service, your beneficiary or estate cannot receive less than:
- the greater of:
- your contributions with interest and
- five times the annual amount of your lifetime and bridge benefits accumulated at your death
- less the sum of any pensions that have been paid to you, your spouse and children
- the greater of:
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- Part I
- Refers to that part of the Canadian Forces Superannuation Act that deals with pension benefits for members of the Regular Force and members of the Reserve Force who meet certain eligibility requirements. Also referred to as the Regular Force Pension Plan in this website.
- Part I.1
- Refers to that part of the Canadian Forces Superannuation Act that deals with pension benefits for members of the Reserve Force. Also referred to as the Reserve Force Pension Plan in this website.
- Past service pension adjustment
A Past Service Pension Adjustment (PSPA) is the sum of all the pension adjustments for the years you are buying back past service. A PSPA will affect your registered retirement savings plan (RRSP) room in the year it is issued. If you have sufficient RRSP room, the Canada Revenue Agency (CRA) will certify your PSPA and you will be permitted to buy back past service.
If you do not have enough room, you can make room by:
- transferring funds from your RRSP to the pension fund to pay for the buy-back or
- withdrawing money from your RRSP and paying tax on it
If the PSPA is not certified by the CRA, the buy-back is denied, and whatever payments you have made will be returned to you or to the fund from which it was transferred.
- Pension adjustment
The Canada Revenue Agency (CRA) limits the annual tax-deductible contributions you can make to all your retirement savings plans. The maximum amount is 18% of your earned income in the previous year, up to an annual dollar limit. In 2009, the maximum is $21,000 and in 2010, $22,000. After 2010, the limit should increase in line with average Canadian wages.
This 18% limit is the total you can save under all tax-sheltered retirement plans, including the Reserve Force Pension Plan and your personal registered retirement savings plan (RRSP). A formula established by the CRA is used to estimate the value of your benefits under the Reserve Force Pension Plan. This value is referred to as the pension adjustment (PA). Your PA isn't related – in a dollar-for-dollar sense – to the amount of contributions paid into the plan. The formula set out by the CRA is as follows (the PA is rounded to the nearest dollar).
PA = 9 × benefit earnedFootnote 1 − 600
In any given year, the maximum you can contribute to an RRSP is calculated as 18% of your previous year's earnings, less the PA and any PSPA, plus any previous years' allowable contributions that you did not use. Each year, after you file your income tax return, the CRA sends you a Notice of Assessment which indicates this amount. You can make an RRSP contribution up to this amount or carry it forward for use in future years.
- Pensionable earnings
- Your pensionable earnings include your pay for your rank, plus any amount paid to you as pay in lieu of leave.
- Pensionable service
Pensionable service is used:
- to determine what type of pension benefit you receive at release (unreduced pension, reduced pension, deferred pension etc.);
- to determine by how much your pension is reduced, if you retire before being eligible for an unreduced pension
Pensionable service includes:
- the period of service when you contribute to the Reserve Force Pension Plan since you last enrolled
- any service you buy back. The full period that you were eligible to buy back counts as pensionable service, even if you only pay a portion of the full cost of the buy-back
Topic beginning with the letter R
- Reduced pension
A pension that is reduced because you are taking it early – that is, before you are eligible for an unreduced pension. In the Reserve Force Pension Plan, you are eligible for a reduced pension when you are age 50 or older, with at least two years of pensionable service, and you do not meet the criteria for an unreduced pension.
Also known as annual allowance.
- Regular Force (Full-Time) Pension Plan
- Also known as Part I of the Canadian Forces Superannuation Act, which describes pension benefits for members of the Regular Force and for Reserve Force members who meet certain eligibility requirements. In this website, Part I is always referred to as the Regular Force Pension Plan.
- Reserve Force (Part-Time) Pension Plan
- Also known as Part I.1 of the Canadian Forces Superannuation Act, which describes pension benefits for members of the Reserve Force. In this website, Part I.1 is always referred to as the Reserve Force Pension Plan.
Topic beginning with the letter S
- Simple interest
- Interest calculated annually on the original principal amount only. Any accumulated interest from prior periods is not used in calculations for the following periods.
The person of the same or the opposite sex who:
- was married to you at the time of your death or when you reached age 60, whichever is earlier or
- had been living with you in a conjugal relationship for at least one year at the date of your death, and, if you are over age 60, has cohabited continuously with you since before you reached age 60
- Survivor allowance
- See survivor pension.
- Survivor pension
The monthly pension payable to your eligible spouse at your death. Under the Reserve Force Pension Plan, a pension is payable to your eligible spouse if you have two or more years of pensionable service at your death.
Also known as survivor allowance.
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- Transfer value
The present value of your earned pension in today's dollars. The calculation is based on a set of actuarial assumptions which include economic and demographic assumptions.
You must be under age 50 to be entitled to receive the transfer value of your pension - paid as a lump sum. You can choose to transfer the lump-sum to:
- a locked-in retirement savings plan, such as, a locked-in registered retirement savings plan, life income fund, or a restricted life income fund
- an insurance company to purchase a pension or
- your new employer's registered pension plan, if that plan accepts the transfer
If you transfer the value of your pension, no tax slip will be issued by the Government of Canada Pension Centre or by the financial institution receiving the transfer, since your transfer value will be directly transferred from one tax-sheltered vehicle to another.
Limit on amount that can be tax-sheltered:
- The Income Tax Act sets a limit on what part of the transfer value can be tax-sheltered. This limit is the annual pension payable at age 65 (plus applicable indexing) × 9
- When you release, the Government of Canada Pension Centre will provide you with the breakdown of the portion that is outside the tax limits, if any. In some cases, the full transfer value will be within the tax limits; for other plan members, it is possible that a portion of the payment will be in excess of the applicable tax limits
If a portion of the transfer value is outside the tax limits, either:
- that portion will be paid directly to you, with income tax deducted at source. A T4A (and Relevé 2, if applicable) will be issued for this portion of the transfer. In some cases, the tax deducted at source may not be enough, and you may owe additional tax when you file your income tax return
- if you have sufficient RRSP room, you may choose to transfer this portion of your payment to a RRSP. No tax will be deducted from the payment, but a T4A (and Relevé 2, if applicable) will be issued, and your financial institution will provide you with a tax receipt for filing your income tax return
Topic beginning with the letter
- Unreduced pension
A pension that is paid immediately with no reduction for early retirement. Under the Reserve Force Pension Plan, you are entitled to an unreduced pension if you:
- have 25 years (9,131 days) of CF service
- are age 60 with at least two years of pensionable service
- are age 55 with 30 years of pensionable service
- have 2 or more years of pensionable service and are disabled on release or
- you are involuntarily released due to a reduction in the Canadian Armed Forces and either:
- have 20 years of pensionable service or
- are age 55 or older with 10 years of pensionable service
Also known as an immediate annuity.
- Updated for wage growth
- In the pension formula, your pensionable earnings are increased to take into account the average increase in Reserve Force wages since the date of your earnings.
- Updated to year of decision to buy back
In calculating the cost to buy back previous Canadian Forces service (except Reserve Force service for which you received a transfer value), your earnings are updated to take into account the average increase in Reserve Force wages since the date of your earnings.
Topic beginning with the letter V
The point in time at which a member earns the right to a benefit from the pension fund based on their contributions and those made by the Federal Government on their behalf, even if the member releases from the CAF. In the case of the Canadian Forces Superannuation Act (CFSA), this point in time is following two years of pensionable service.
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- Year's Maximum Pensionable Earnings
Year's Maximum Pensionable Earnings (YMPE) is the maximum amount of earnings that the Government sets each year and uses to calculate contributions and pensions under the Canada Pension Plan or Quebec Pension Plan. Annual changes to this amount are based on increases in the average Canadian wages.
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