Exploring Pension Benefit Options: Annual Allowance

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

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

Hi, I'm Melissa.

Today, I'd like to talk to you about the annual allowance.

This is one of many pension options that may be available to you when you retire from the Federal Public Service.

So, what is an annual allowance you can choose to receive a reduced monthly pension before you reach the normal retirement age.

The Public Service Pension Plan sets the normal retirement age as age 60, if you became a plan member on or before December 31st, 2012, or age 65, if you became a plan member on or after January 1st, 2013.

(The narrator walks by the left side of the screen. She sits down on a garden chair. When she says “The public service pension plan sets the normal retirement age as,” a grey text box appears in the top-left corner of the screen with the words [written in white] AGE 60 IF YOU BECAME A PLAN MEMBER ON OR BEFORE DECEMBER 31, 2012/AGE 65 IF YOU BECAME A PLAN MEMBER ON OR AFTER JANUARY 1, 2013. The text box disappears to the left side of the screen.)

An annual allowance is an early retirement option.

This is a reduced pension because it is payable at a younger age and it is usually for a longer period of time.

You can receive an annual allowance when you retire if you have at least two years of pensionable service and you are between age 50 and 60.

If you became a plan member on or before December 31st, 2012, or between age 55 and 65 if you became a plan member on or after January 1st, 2013.

(When the narrator says “… if you have at least two years of pensionable service and you are …,” the screen becomes blurry and a large grey chart appears with the words BETWEEN AGE 50 AND 60 IF YOU BECAME A PLAN MEMBER ON OR BEFORE DECEMBER 31, 2012 OR BETWEEN AGE 55 AND 65 IF YOU BECAME A PLAN MEMBER ON OR AFTER JANUARY 1, 2013.)

Keep in mind that we will pay your annual allowance from the later of your termination date, the date you signed your option for an annual allowance or age 50 or 55, depending on when you became a plan member.

(When the narrator says “Keep in mind that …,” that same chart becomes black and we can read at the top ANNUAL ALLOWANCE IS PAYABLE THE LATER OF. In the centre of the chart, there is a horizontal timeline. On this line, at the far left, the words YOUR TERMINATION DATE are written; in the middle of the line, we can read DATE YOU SIGNED YOUR OPTION FOR AN ANNUAL ALLOWANCE; at the far right, the words AGE 50 OR 55 DEPENDING ON WHEN YOU BECAME A PLAN MEMBER appear. The chart disappears.)

We calculate your annual allowance based on your total years of pensionable service and your average salary for the five consecutive best paid years of service.

(When the narrator says “We calculate your annual allowance based on …,” a text box appears in the top-left corner of the screen with the words TOTAL YEARS OF PENSIONABLE SERVICE/AVERAGE SALARY FOR THE FIVE CONSECUTIVE BEST-PAID YEARS OF SERVICE. The text box disappears upward.)

As mentioned earlier, when choosing an annual allowance prior to your normal retirement age, you receive a reduced pension.

The reduction is calculated at 5% for every year you are under the normal retirement age or under 30 years of service.

(When the narrator says “The reduction is calculated at 5% for every year …,” a text box appears in the top-left corner of the screen with the words 5% FOR EVERY YEAR YOU ARE UNDER THE NORMAL RETIREMENT AGE/UNDER 30 YEARS OF SERVICE. The text box disappears upward.)

If you have more than 25 years of pensionable service, we calculate the reduction based on your age or your pensionable service.

If you have less than 25 years of pensionable service, the reduction is based on your age only.

It is important to know that this reduction is permanent. It remains so even after you have reached the normal retirement age.

(When the narrator says “… that this reduction is permanent …,” a text box appears in the top-right corner of the screen with the words REDUCTION IS PERMANENT. The text box disappears.)

There is an exception to this rule if before you reach the normal retirement age, you become disabled, you can apply for a medical retirement.

Health Canada would have to confirm that you are permanently disabled.

We would be more than happy to answer your questions if this applies to you.

You may also view our video on retirement due to disability.

Did you know that your pension is also protected from inflation? That's right. Like all other pension benefits, we fully index your annual allowance to the cost of living.

This means that upon receiving your pension, we will adjust it to reflect the cost of living from the date you retire.

After that, we adjust your pension every January.

That said, going back to work could affect your pension and indexing.

So please contact us if you are thinking of returning to work in the Federal Public Service.

Now, what happens to your supplementary death benefit and other benefits after retirement? Well, if you were eligible to the Supplementary Death Benefit Plan while employed and you decide to receive your annual allowance within 30 days from the date of your retirement, your participation is automatically extended and coverage continues at the same premium rate as when you were an employee.

If you decide to receive your annual allowance at a later date, your participation is not automatic.

You must complete a form to continue your coverage, and your coverage will be at a higher cost than when you were an employee.

(When the narrator says “… if you were eligible to the Supplementary Death Benefit plan while employed …,” a text box appears in the top-left corner of the screen with the words RECEIVE YOUR ANNUAL ALLOWANCE WITHIN 30 DAYS FROM THE DATE OR YOUR RETIREMENT/PARTICIPATION IS AUTOMATICALLY EXTENDED/COVERAGE CONTINUES AT THE SAME RATE. The text disappears. When the narrator says “If you decide to receive your annual allowance at a later date …,” the following words appear in the same text box: RECEIVE YOUR ANNUAL ALLOWANCE AT A LATER DATE/PARTICIPATION IS NOT AUTOMATIC/MUST COMPLETE A FORM TO CONTINUE/COVERAGE WILL BE AT A HIGHER COST. The text box disappears.)

Once you qualify for an annual allowance, you may also be eligible to the following insurance plans, the Public Service Health Care Plan and the Pensioners Dental Services Plan.

Please call us for more details about these benefits.

You may owe pension contributions for a service buyback or a period of leave without pay.

If you decide to receive your annual allowance later than your retirement date, you must send us your service buyback payments directly or additional interest charges will apply.

We can provide you with the amounts owing for both types of contributions.

Retirement is an important step in your life, as part of your planning, it's a good idea to get an estimate of your pension benefits before retiring. To do so, go to the Compensation Web Applications or CWA website.

Access the pension portal for active members to the public service.

Once you sign in, click on pension tools and then Pension Benefits Calculator to calculate your pension.

Or you can simply call us.

(When the narrator says, “… you can go to the Compensation Web Applications…” a screen shot of the Web page that leads to the Compensation Web Application appears in the top-left corner of the screen. When the narrator says “Access the Active Member Pension Application” a screen shot of the Web page that leads to the Active Member Pension Application appears in the top-left corner of the screen. When the narrator says, “… click on the Personalized Pension Tools…” a screen shot of the Web page that leads to the Personalized Pension Tools appears in the top-left corner of the screen. The screen shot disappears. The narrator stands up.)

I hope this was helpful to you.

For more information about the annual allowance, please visit our website at canada.ca/pension-benefits.

(When the narrator says “… please visit our website …,” 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)

(Text on screen: Check us out: facebook.com/PSPC.SPAC, instagram.com/pspc_spac, twitter.com/pspc_spac, youtube.com/PWGSCanada)

[Music stops]

(Public Services and Procurement Canada signature)

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