Protecting pensions – FAQs | The Professional Institute of the Public Service of Canada

General Questions

What is a pension? How do pensions work?

A pension is income received in retirement. Over the course of your working life, both you and your employer make contributions to your pension. Those contributions are then invested, and upon retirement, your pension is paid from that investment fund. Your pension is essentially forced saving on your part and deferred salary on the part of your employer. Your pension is a combination of your savings and deferred compensation from your employer – it’s not money that is gifted to you upon retirement.

What are the different types of pensions?

Many of our members have defined benefit pension plans. A defined benefit pension plan provides a guaranteed annual income at retirement. Some of our members have a target benefit pension plan. This type of plan also provides an annual income at retirement, but it is not guaranteed because you take on more of the risk associated with the investments and market fluctuations. And some of our members have a defined contribution pension plan. A defined contribution plan does not provide an annual income, instead, you are granted access to your funds upon retirement and you decide what kind of payout model you want.

What is the difference between defined benefit pensions and target benefit pensions?

A defined benefit pension provides a guaranteed annual income at retirement. This is the best type of pension. The employer must ensure the plan is able to pay you and takes on the risk created by investment and market fluctuations. While a target benefit pension pays you an annual income at retirement, it is not guaranteed. If the pension fund does not do well in the market, you may have to pay higher contributions or have your retirement income cut.

What are the details of my personal pension? How many years do I need to contribute? And how much will my monthly income be when I retire?

PIPSC does not have access to any individual pension information, although you can find some general information on our pensions page. You can find a detailed calculation of your Public Service Pension through the Compensation Web Applications or by phoning the Pension Centre. For other pensions, contact your HR department for additional plan information.

Are private or workplace pensions too expensive or unsustainable?

Over the course of your career, you and your employer contribute to your pension. This is essentially forced saving on your part, and deferred compensation on the part of your employer. Those funds are then invested, and upon retirement, your pension is paid from those funds. Depending on the type of pension you have, your employer may be responsible for ensuring that the pension is able to pay you when it comes time for you to retire. However, if a pension plan’s rules are followed and the plan is well-managed, the likelihood of your pension becoming too expensive or unsustainable is low.

We have it pretty good. Why do we need to worry about protecting our pensions?

We need to protect our own pensions and fight for a secure retirement for everyone.

Federal and provincial governments have opened the door to legislation that could threaten our workplace pensions. For example, in 2016 the federal Liberal government introduced a bill that would have allowed federally regulated and Crown corporation employers to transition secure, defined benefit plans to risky, target benefit plans. And the Conservative provincial government in New Brunswick actually succeeded in passing similar legislation that impacts PIPSC members in that province.

Beyond that, only 37% of people in Canada have workplace pensions to secure their retirement, and only 25% have secure defined benefit plans.

Without a workplace pension, seniors have to rely on personal savings, the Canadian Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS). In Canada as of 2018, only 22% of people who filed taxes contributed to their RRSPs and Canadian households on average saved only $852.

Government retirement programs alone leave many seniors living in poverty. And, precarious jobs today are setting young people up for the same precarious retirement. This is why the Canadian labour movement fights for pensions for all and improvements to these government programs.

What are we doing to support people without workplace pensions?

Government retirement programs alone leave many seniors living in poverty. And, precarious jobs today are setting young people up for the same precarious retirement. This is why the Canadian labour movement fights for pensions for all and improvements to these government programs. Everyone in Canada deserves a secure retirement.

In 2019, the Canadian Labour Congress fought and won an increase in CPP to one-third of the average income from one-quarter. An important step toward the goal of increasing CPP to 50% of average income. We can win and ensure a secure retirement for everyone.

We stand with the Canadian Labour Congress in the fight for a secure retirement for all. It is unacceptable to have elders living below the poverty line and we won’t stand by and allow that same fate for young workers.

Public Service Pension Plan (PSPP)

What steps should I take before retirement?

Understanding your pension is an important first step in preparing for retirement. Check out the page What steps should I follow when preparing to retire for a helpful starting point from the federal government. You may also find their frequently asked questions useful.

What is a pension statement?

Prior to 2017, a pension statement was mailed to Public Service employees on an annual basis providing members with the current transfer value of their pension and an estimate of the pension they would receive in retirement. In recent years, these statements have not been provided due to issues related to the Phoenix Pay System. If you require a pension statement because you are nearing retirement or due to a specific issue or concern, you can contact the Pension Centre to receive this information. The cancellation of these pension statements do not affect your pensionable earnings.

How do I get a pension statement?

In 2017, the Pension Centre stopped issuing pension statements due to problems related to the Phoenix Pay System. There is a tool within the Compensation Web Applications (CWA) that provides this information, however as it obtains the information from the Phoenix Pay System that may be inaccurate, we recommend contacting the Pension Centre directly to obtain an accurate estimate of your pension. It is recommended to get a pension estimate from the Pension Centre when you are nearing retirement or if you have a specific issue or concern. The cancellation of these pension statements does not affect your pensionable earnings.

How do I contact the Pension Centre?

The Pension Centre is a key resource for all your pension needs. They are the only resource that can currently provide you with an accurate pension estimate. Please have your Personal Record Identifier (PRI) ready when contacting the Pension Centre.

How long before I retire should I contact the Pension Centre?

You should contact the Pension Centre at least six months prior to your retirement date, however they need a formal notice of retirement three months before you retire. For more information, consult the Government of Canada Frequently Asked Questions page Preparing for retirement - Pension.

What about PSP pensions prior to 2000?

Prior to 2000, public service pensions were paid directly from employer and employee contributions. Because the plan was not properly invested, there were no investment earnings to cushion pensions from sudden changes to costs or revenue. The plan was volatile. In 1999, the Public Sector Pension Investment Corporation was created to separate pension contributions from other government funds. The Public Sector Pension Investment Corporation has independently managed the employer and employee pension contributions since 2000 – investing them in the Canadian and global economy. This means that when you draw your income at retirement, it comes from this investment fund and not directly from government funds. This makes the PSP plan sustainable and cost-effective for taxpayers.

What is the difference between Group 1 and Group 2 for pensions? How do I know whether I am part of Group 1 or Group 2 when it comes to my pension?

Anyone who was hired and contributing to the pension plan up to December 31, 2012 is part of Group 1. Anyone who was hired and contributing to the pension plan, on, or after January 1, 2013 is part of Group 2. The age of retirement for Group 1 is 60 (early retirement at 55), the age or retirement for Group 2 is 65 (early retirement at 60). Group 2 does have lower yearly contributions to the plan due to the added years of service needed for a full retirement.

Will reducing my weekly hours affect my pension? Can I phase into retirement by working part-time?

Some members want to phase into retirement by reducing their work hours as they get closer to their retirement date by choosing to work part-time. As reducing your hours will reduce your annual salary, there may be an impact to your pension. However the impact, if any, will vary greatly from person to person. You should always contact the Pension Centre and obtain accurate information for all the scenarios you are considering. For more information on part-time working arrangements, you can refer to the employer’s Directive on Leave and Special Working Arrangements and the Leave without pay information package.

How do I calculate my pension?

Due to confidentiality, it is important to note that the union does not have access to your personal information needed to calculate your pension. Your retirement income is calculated based on your five consecutive years of highest paid service as well as your years of service. You can use the PSP tool to estimate what your monthly and yearly benefits would be. We recommend that you contact the Pension Centre to obtain an accurate Pension Statement, based on your actual earnings and employment history.

Will my pension keep up with the cost of living and inflation?

Yes, the PSP is indexed. Indexing is the annual cost of living adjustment, based on the official Consumer Price Index (CPI), which is an objective, commonly used calculation. Without indexing, pensioners would fall behind in their purchasing power. Indexing keeps your pension up with the rate of inflation, meaning your pension retains its value over time. You can access more information on indexation and current rates here.

Can the challenges related to the Phoenix Pay System affect my retirement?

Once you notify the Pension Centre of your retirement date, they will begin processing your pension immediately. Any inaccuracies related to information received from the Phoenix Pay System will then be adjusted as needed by the Pension Centre. Once the Pension Centre has your accurate pay information they will process your pension benefit. You can consult the Government of Canada Frequently Asked Questions page Preparing for retirement - Pension for more information or contact the Pension Centre directly for an estimate of your pension earnings should you have a specific issue or concern. It should be noted that the cancellation of mailed pension statements does not affect your pensionable earnings.

Is the Public Service Pension (PSP) Plan too expensive or unsustainable for the Canadian government?

Over the course of your career, you and your employer (in this case, the Canadian government) contribute to the PSP. This is essentially forced saving on your part, and deferred compensation on the part of your employer. Those funds, along with the contributions of your colleagues, are pooled and invested. Upon your retirement, your pension is paid from those funds. Defined benefit pension plans, like the PSP, are built for the long-term – meaning they can weather short-term dips in the market.

As of March 31, 2019, the PSP plan was valued at $168 billion and, despite recent market fluctuations due to the COVID–19 pandemic, is still believed to be in good, stable condition. The actuarial formulas continue to ensure the plan is properly funded and financially sustainable for the long haul.

Target Benefit (TB) plans

What is a target benefit pension plan and how does it work?

Over the course of your working life, both you and your employer make contributions to your pension. Those funds are then invested, and upon retirement your pension is paid from those investments. Your pension is essentially forced saving on your part and deferred compensation on the part of your employer. With a target benefit pension, you will receive an annual income until your death, but the amount is not guaranteed. For more information on your Defined Contribution Pension Plan, please contact your Human Resources Department or Pension Department.

What is the difference between a target benefit pension plan and other plans available?

Similar to a defined benefit pension plan, a target benefit pension plan provides an annual income until your death. However, target benefit pensions are more fluid and the risk associated with the plan’s investments falls, in part or completely, to employees and retirees. For example, should the pension fund not do well in the market, you may have to pay higher contributions or have your retirement income cut. This is just one of numerous things that could impact a target benefit pension.

In short, a target benefit pension basically operates the same way a defined benefit pension would, until something goes wrong. However, with a target benefit plan, like with a defined benefit plan, contributions are pooled together – so the pension fund is better prepared to weather short-term dips in the market than a defined contribution plan.

A target benefit pension is better than having no pension at all and relying on your personal savings because your employer does contribute over time. For more information on your target benefit pension plan, please contact your Human Resources Department (Or Pension Department).

When can I start receiving CPP/QPP?

The regular age to begin receiving CPP/QPP is 65. If you choose, you can start receiving CPP/QPP at the age of 60 even if you are still working. But taking CPP/QPP early will decrease the payments you receive from the plan for the rest of your life. It is important to know that you will still be paying for CPP/QPP as long as you are working, and the calculations for your payments will be made based on the time you start receiving CPP/QPP. You can contact Service Canada to get more information on all the options available to you.

How do I know whether I will be receiving CPP or QPP?

Where you live determines whether you will receive CPP or QPP. If you live in Quebec, you will receive QPP. If you live anywhere else in Canada, you will receive CPP. Both plans are coordinated, so even if you lived in Quebec for most of your career but then choose to retire in British Columbia, your CPP will account for your contributions to QPP over the course of your career.

If my workplace pension makes my retirement income too high, is it possible that I will not receive any CPP/QPP or OAS benefits?

Like your workplace pension plan, you pay into CPP/QPP, so you will receive it no matter the amount of your retirement income. Old Age Security (OAS) is tied to your income, so that benefit may be reduced depending on your income. You can contact Service Canada to get more information on CPP/QPP and OAS.

Defined Contribution (DC) plans

What is a defined contribution pension plan and how does it work?

Over the course of your working life, both you and your employer make contributions to your pension. A defined contribution plan has fixed contributions from you and the employer.

Those funds are then invested and these investments are based on your choices within the portfolio of options provided to you by the plan. The amount you receive at retirement will depend on how those investments do in the market. Upon your retirement you are granted access to that pension and must decide how your pension will be paid to you, often by purchasing an annuity.

Your pension is essentially forced saving on your part and deferred compensation on the part of your employer. For more information on your defined contribution pension plan, please contact your Human Resources Department or pension department.

How can we protect our defined contribution pension against market fluctuations?

Your defined contribution pension plan will have different investment options (stocks, mutual funds, etc.), usually with varying degrees of risk and projected rates of return. As a contributor to the plan, you create your own investment portfolio based on these options. Most financial advisors will recommend choosing higher risk investments when you are further from retirement, and moving to lower risk investments as you get closer to retirement. Regardless, it is very important that you consider your personal risk tolerance and how each fund is managed to make a decision that is right for you. You can contact your Human Resources Department or Pension Department for any questions related to your pension and the management of your investments. You can also consult a personal financial advisor if you need any additional guidance with your investments. Due to confidentiality, it is important to note that the union does not have access to your personal information needed to calculate your pension.

When can I start receiving CPP/QPP?

The regular age to begin receiving CPP/QPP is 65. If you choose, you can start receiving CPP/QPP at the age of 60 even if you are still working - but taking CPP/QPP early will decrease the payments you receive from the plan for the rest of your life. It is important to know that you will still be paying for CPP/QPP as long as you are working, and the calculations for your payments will be made based on the time you start receiving CPP/QPP. You can contact Service Canada to get more information on all the options available to you.

How do I know whether I will be receiving CPP or QPP?

Where you live determines whether you will receive CPP or QPP. If you live in Quebec, you will receive QPP. If you live anywhere else in Canada, you will receive CPP. Both plans are coordinated - so even if you lived in Quebec for most of your career but then choose to retire in British Columbia, your CPP will account for your contributions to QPP over the course of your career.

If my workplace pension makes my retirement income too high, is it possible that I will not receive any CPP/QPP or OAS benefits?

Defined Benefit (DB) plans

What steps should I take before retirement?

Before you plan on retiring, you should always contact your Human Resources Department or Pension Department to get the steps required to retire and receive a pension estimate. Due to confidentiality, it is important to note that the union does not have access to your personal information needed to calculate your pension.

What is a pension statement?

Most DB plans provide an annual pension statement to plan members. This might be distributed electronically or via mail, and provides information about your pension personalised to you. Some pension plans even allow you to check your information in real time through a web portal. If you are interested in receiving a pension statement or finding out more, contact your Human Resources or Pension Department. Due to confidentiality, it is important to note that the union does not have access to your personal information needed to calculate your pension.

What is the age of retirement for my pension?

Depending on your employer and pension plan, the age of retirement may be different. You can request this information from your Human Resources Department or Pension Department.

Will reducing my weekly hours affect my pension? Can I phase into retirement by working part-time?

Some members want to phase into retirement by reducing their work hours as they get closer to their retirement date by choosing to work part-time. As reducing your hours will reduce your annual salary, there may be an impact to your pension. However the impact, if any, will vary greatly from person to person. You should always contact the Human Resources Department or Pension Department and obtain accurate information for all the scenarios you are considering.

How do I calculate my pension?

Many defined benefit plans are indexed. Indexing is the annual cost of living adjustment, based on the official Consumer Price Index (CPI), which is an objective, commonly used calculation. Without indexing, pensioners would fall behind in their purchasing power. Indexing keeps your pension up with the rate of inflation, meaning your pension retains its value over time. We recommend that you contact your Human Resources Department or Pension Department to confirm if and how your plan is indexed.

Will my pension keep up with the cost of living and inflation?

What is the “commuted value” and how does it work?

In the event that you leave your job prior to retirement, you may have the option of taking the “commuted value” (essentially the current value) of your pension out of your defined benefit plan. If you decide to take the commuted value, you can invest that money into another retirement savings vehicle. But in taking the “commuted value” out of your defined benefit plan and investing it yourself, you are assuming all of the risk associated with that investment, whereas your employer takes on the risk within the pension plan. You can also withdraw it as cash, but it will be taxed as income. While the choice to withdraw the commuted value is yours to make, it almost never makes good financial sense over other options. If you are considering withdrawing the commuted value, we strongly recommend you consult with multiple financial advisors before making a decision. If you need assistance in understanding how your “commuted value” has been calculated, you can contact our team at pensionsbenefits@pipsc.ca.

What happens to my pension after I pass away?

This is based on your individual situation and depends on your marital status among other factors. Almost all defined benefit plans also include a benefit guarantee. This means if you pass away before retirement or within a certain number of years of retirement, an amount is paid to your estate. You should contact your Human Resources Department or Pension Department for the provisions specific to your pension and ensure that your marital status and beneficiary information is always up to date.

When can I start receiving CPP/QPP?

How do I know whether I will be receiving CPP or QPP?

If my workplace pension makes my retirement income too high, is it possible that I will not receive any CPP/QPP or OAS benefits?

What is the difference between defined benefit pensions and target benefit pensions?

A defined benefit pension provides a guaranteed annual income at retirement. This is the best type of pension. The employer must ensure the plan is able to pay you and takes on the risk created by investment and market fluctuations. While a target benefit pension pays you an annual income at retirement, it is not guaranteed. For example, if the pension fund does not do well in the market, you may have to pay higher contributions or have your retirement income cut. This is just one of numerous things that could impact a target benefit pension.