Increasing your pension—Reservists in the Reserve Force Pension Plan
Increasing your pensionable earnings and your pensionable service may be advantageous.
The Reserve Force Pension Plan provides benefits based on a percentage of your total pensionable earnings at retirement. Increasing your pensionable 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.
If you have previous service for which you did not contribute or for which you received a lump-sum benefit, you can increase your total pensionable earnings and your pensionable service by making a past earnings election.
You may want to know
What is the difference between pensionable service and Canadian Forces service?
Pensionable service is used to determine
- what type of pension benefit you receive at release (unreduced pension, reduced pension, deferred pension, etc.) and
- by 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 Reserve Force Pension Plan and
- 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
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
Is there a maximum number of years of pensionable service that I can accumulate?
Yes. The maximum is 35 years of pensionable service.
What happens if I accumulate 35 years of pensionable service?
You stop accumulating pensionable service and your contributions decrease to 1% of your earnings. Your total pensionable earnings – used in the pension formulas – include earnings for the first 35 years of your service, updated for wage growth to the date of your release.
This means that your pension continues to increase even after you have 35 years of pensionable service.
What does it mean to "buy back" previous service?
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 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 immediate annuity at an earlier date.
Why should I consider buying back previous service?
Buying back service increases your pensionable service and total pensionable earnings.
Increasing your pensionable earnings:
- increases your pension and
- provides a larger pension for your survivor and children after your death
Increasing your pensionable service:
- may help you become eligible for an unreduced pension at an earlier date
- 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 of your pension payments and
- may allow you to reach 35 years of pensionable service faster
I am a long way from retirement. Is buying back service or topping up now a good idea?
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 service and you will not have a second chance to buy back this service after that. It is important you examine your options now
- If you buy back service, the value of your pension benefit increases. Even if you leave the Canadian Armed Forces (CAF) before retirement, you will have more money saved for retirement
When am I eligible to buy back service?
- If you have never before been a member of the Reserve Force Pension Plan, you can buy back service after two years in the Reserve Force Pension Plan
- If you were previously a member of the Reserve Force Pension Plan who has since rejoined the plan, you can buy back service as soon as you rejoin the Reserve Force Pension Plan as long as you did not previously lose the right to buy back this service by missing the deadline
What service can I buy back?
You can buy back prior service as outlined below.
The following table represents the types of service you can buy back:
|For service with…||You can buy back…|
|the Regular Force||
service without pay for maternity and parental reasons; and
service for which you received a lump-sum benefit from the Regular Force Pension Plan, as long as:
|the Reserve Force||
service during which you did not contribute to the Reserve Force Pension Plan, as long as:
service for which you received a refund of contributions or a transfer value from the Reserve Force Pension Plan or from the Regular Force Pension Plan.
Can I buy back service anytime?
No. Once you are eligible to buy back, you have a strict deadline by which you can buy back service.
Canadian Armed Forces service (except Reserve Force service for which you received a transfer value)
The Government of Canada Pension Centre sends you a notification indicating you are eligible to purchase your previous service. You must buy back within one year after the date of this notification.
If you miss this deadline, you will lose the right to buy back the previous service.
Reserve Force service for which you received a transfer value
The Government of Canada Pension Centre will send you a notification advising you that you are eligible to purchase your previous service. You must choose to buy back before one year from the date of this notification. If you release from the Reserve Force before the deadline, you are still eligible to buy back that service if you later rejoin the plan.
The Government of Canada Pension Centre will then send you a notification informing you of the amount to be paid. You have 90 days from the date of the notification to pay for the buy-back. If you do not pay the full amount, your pensionable earnings credit for your buy-back will be prorated based on the amount, if any, that was received during the 90-day period.
If you wish to buy back prior Canadian Armed Forces (CAF) service for which you received a Transfer Value, you must complete the Service Buyback Form for Transfer Value Service (CF-FC 2005).
How much does it cost to buy back service?
That depends on the service, as follows:
Previous Canadian Forces service (except Reserve Force service for which you received a transfer value)
Pensionable earnings in the calendar year of the service, updated to the year of your decision to buy-back
Reserve Force Pension Plan contribution rate in the year of your decision to buy-back
7% interest compounded annually, calculated from the middle of each year that you bought back to the date of your decision to buy back that service
Previous Reserve Force service for which you received a transfer value
The amount of the transfer value you were paid when you released
Interest compounded quarterly, from the day you were paid the transfer value to the end of the month before the month in which you made your decision to buy back that service
What are your payment options for a service buyback?
If you choose to buy back previous service, 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:
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 (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. These 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
What are the tax implications if I buy back service?
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.
What steps do I need to take to buy back service?
- Before you begin please contact your unit base orderly room to obtain records of your past service
- Estimate the cost of buying back service by referring to the Service buyback package section "Estimates"
- Consider consulting a financial advisor for help in determining whether to buy back service and the best payment method
- 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
Can I change my mind and cancel my buy-back after I have submitted my signed buy-back form?
No. You can only cancel a buy-back 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 if you can show that the cost of the buy-back causes you undue financial hardship which was unforeseen when you made the choice to buy back service.
If I choose to pay only a portion of the full cost of my buy-back for previous Reserve Force Service, can I buy back another portion later?
Can I change the payment method for my buy-back?
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.
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