An attractive benefit of the federal public service is the public service pension plan. The plan is a defined benefit plan meaning that employees are promised a specific predetermined benefit that is calculated by an employee’s salary, years of service, and age instead of depending directly on individual investment returns.
There are a few basic elements of the pension that you should know:
At present there are two streams of pensions:
- For employees who became plan members on or before December 31, 2012. These plan members are eligible to receive an unreduced pension if they end their career with the public service at age 60 or over with at least two years of pensionable (or age 55 with at least 30 years of pensionable service).
- For employees who became plan members on or after January 1, 2013. These plan members are eligible to receive an unreduced pension if they end their career with the public service at age 65 or over with at least two years of pensionable (or age 60 with at least 30 years of pensionable service).
Other bonuses of the plan include:
- Annual indexing: Provides protection from inflation.
- Disability benefits: Provides an immediate annuity regardless of age when approved for retirement on grounds of disability.
- Portability: Provides employees with the ability to transfer pension credits upon joining or leaving the Public Service.
- Survivor benefits: Provides an income for your spouse and children in the event of your death.
Another major benefit of the plan is that if you worked in the Public Service in the past, you may be eligible to buy back years of service that is not currently not credit under your plan or reinstate past service for which you received a transfer value payment when you left the Public Service.
How is my pension calculated?
If you obtain your maximum years of service (35 years) and are at the predetermined age for the plan. Your annual pension is equivalent to 70 percent of the average of your five highest paid years. For example: If your maximum salary was $90 000 you would be paid 0.70 * 90 000 = $63 000.
However, if you retire earlier or do not reach the maximum years of services various other options and calculations exist to determine who the employee would like to be paid.
When can I start contributing?
A full-time or part-time public service employee (minimum 12 hours per week) an employee is under the public service pension plan:
- From your first day of work, if appointed on an indeterminate basis;
- From your first day of work, if you are hired for a period more than six months; or
- After six months of continuous employment, if you were originally hired for a period of six months or less.
How are my contribution rates calculated?
For employees who became plan members on or before December 31, 2012 (Pension Eligibility at Age 60). If an employee makes a yearly salary of $53,600, one would contribute:
Up to the year’s maximum pensionable earnings ($53,600 in 2015) 8.15%
Above the year’s maximum pensionable earnings 10.40%
If you work full-time and earn $65,000 in 2015, your contributions in 2015 would be calculated as follows:
8.15% x $53,600 = = $4,368.40
Plus +
10.40% x ($65,000-$53,600) = $1185.60
Total $5554.00
For employees who became plan members on or after January 1, 2013 (Pension Eligibility at Age 65). If an employee makes a yearly salary of $53,600, one would contribute:
Up to the year’s maximum pensionable earnings ($53,600 in 2015) 7.05%
Above the year’s maximum pensionable earnings 8.54%
If you work full-time and earn $65,000 in 2015, your contributions in 2015 would be calculated as follows:
7.05% x $53,600 = = $3778.80
Plus +
8.54% x ($65,000-$53,600) = $ 973.56
Total $4752.36