Service Buyback—Costing and Methods of Payments

(Background music: Welcome page with a logo of the Government of Canada Pension Centre.)

At the Government of Canada Pension Centre, we're here to help.

My name is Bruce.

Are you considering buying back your past service? Then let's look at the cost and payment methods for your buyback.

The cost of your service buyback is based on your salary, rates of contribution and your age.

Depending on the date you mail your buyback form, we at the Pension Centre use different salary rates to calculate the cost.

(The narrator is sitting on a desk, and there are monitors on workstations in the background, along with a big-screen TV to the left side of the screen. When the narrator says: “The cost of your service buyback …,” a grey text box appears in the top-left corner of the screen, with the words YOUR SALARY, RATES OF CONTRIBUTIONS, YOUR AGE written in white letters. The text box disappears.)

To understand how we arrived at the cost of your past service, it's important to understand the difference between what we refer to as normal and a late service buyback.

So what's a normal service buyback? It's generally a buyback you mail within one year of your notification of plan membership, PWGSC-TPSGC 2018.

To calculate the cost of a normal buyback, we use your salary authorized to be paid on the date you most recently became a plan member.

This includes pensionable allowances and acting pay.

Now, let's define a late service buyback. It's a buyback you mail after that one-year period.

To calculate the cost of a late buyback, we use your salary authorized to be paid on the date you mail your service buyback form PWGSC-TPSGC 3006.

This also includes pensionable allowances and acting pay.

The cost of a late buyback can be much higher than a normal buyback, especially if you mail it later in your career.

(The narrator is standing in front of glass doors through which are tables. On the right side of the screen, next to the narrator, there is a whiteboard. When the narrator says: “… a normal service buyback…,” the words NORMAL, WITHIN ONE YEAR, SALARY ON DATE YOU JOINED THE PLAN appear on the whiteboard. When the narrator is done saying: “… allowances and acting pay,” he turns towards the whiteboard, with an eraser he makes a motion as if erasing the text from the board. The text disappears according to his movements. When the narrator says: “… a late service buyback…,” the words LATE, AFTER ONE YEAR, SALARY ON DATE YOU MAILED FORM appear on the whiteboard. After the narrator says: “… later in your career…,” he turns towards the white board, with an eraser he makes a motion as if he’s erasing the text from the board. The text disappears accordingly.)

A quick side note on authorized salaries.

It's the salary you should be paid, even if it hasn't been paid to you yet. For example, you mail your buyback form just after the signing of a new collective agreement. We have to use your salary rate from this new agreement. It doesn't matter if it takes a while before you receive the adjustment in pay, this is your authorized salary at the time of your buyback.

(The narrator is standing in front of glass doors. In the background we see a big-screen television hanging on a wall, along with a TV cabinet below it. When the narrator says: “A quick side note…,” a grey box appears from the top-right corner of the screen, with the written words AUTHORIZED SALARIES. The box disappears.)

Using the salary rate that applies to you, we calculate the contributions you will need to pay.

Your contribution rate may be single or double, depending on the type of service you buyback.

We calculate the cost of the majority of public service at the single rate. Pensionable employment outside the public service is at the double rate.

(The narrator is sitting on a desk with the monitors on workstations in the background, along with a big-screen TV to the left side of the screen. When the narrator says: “… your contribution rate…,” a grey box appears from the top-left side of the screen with the words SINGLE OR DOUBLE RATE. The box disappears.)

Since you are only paying contributions now to count your past service under the public service pension plan, we add 4% interest from the date the service took place to the date you mail your buyback.

This gives you the total lump sum amount you need to pay or what we call the cash cost.

You may pay for your service buyback in the following ways: Monthly payroll deductions, lump sum payments, or a combination of both.

If you choose monthly payroll deductions, the first payment will be due in the month we receive your service buyback form.

This method of payment is similar to paying a bank loan. It includes additional interest and insurance charges called mortality charges.

These charges cover the cost of life insurance to pay off the buyback in the event of your death.

The cost of paying through monthly deductions is therefore higher than paying by a lump sum.

You should compare the two methods before deciding how you want to proceed.

(The narrator turns at another angle, and is sitting on a desk table. There are monitors on workstations in the background, along with glass doors. When the narrator says: “… monthly payroll deductions…,” a grey box appears in the top-right corner of the screen with the words MONTHLY PAYROLL DEDUCTIONS, LUMP SUM PAYMENTS, A COMBINATION OF BOTH. The box disappears.)

You can make lump sum payments by cheque, bank drafts, or transferring funds from a registered retirement savings plan or a registered pension plan.

Lump sum payments received within 30 days of the date you mail your buyback form will reduce the cash cost.

If we receive a lump sum amount after this 30-day period, we recalculate the cost to include interest and insurance charges.

The payment methods are flexible.

Even if you choose to pay your buyback through payroll deductions, you can make lump sum payments at any time.

(The narrator turns to the previous angle where he is sitting on a desk. When the narrator says: “You can make lump sum payments…,” a grey box appears in the top-left corner of the screen with the words CHEQUE, BANK DRAFT, TRANSFERRING FUNDS FROM A REGISTERED RETIREMENT SAVINGS PLAN OR A REGISTERED PENSION PLAN in white letters. The box disappears.)

I hope this was helpful to you. As always, should you have any questions about this video, feel free to contact us or visit canada.ca/pension-benefits.

(The narrator is standing in front of glass doors. There are sofas and tables in the background. When the narrator says “… feel free to contact us or visit …,” the words CANADA.CA/PENSION-BENEFITS appear on the bottom of the screen. The text disappears.)

Thanks for watching.

(Text on screen: Contact information: Government of Canada Pension Centre – Mail Facility, PO BOX 8000, Matane QC G4W 4T6. Telephone: 1-800‑561‑7930. Email: pwgsc.pensioncentre-centredespensionstpsgc@pwgsc-tpsgc.gc.ca)

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