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Pension Transfer Value / Lump Sum Pymt [Merged]

Thanks for the link. Didn't really found much info, but I found this little bit
http://www.forces.gc.ca/en/caf-community-pension-reg-post-march-2007/benefits.page#q3

So full pension @ 25 years of service (which gets paid immediately? if I understand it correct) or at 60 years old.
Reduced pension at 50 years old (It doesn't say by how much it's reduced).

So am I understanding that it's 2%*years of service*YMPE and you can get this either immediately after 25 years of service (no matter how old you are?) or (if you retire earlier than 25 years of service) at 60 years old.

Also there is another 1.375%*years of service*YMPE but not sure how that plays a factor. Is it actually 3.375% and not just 2%?
http://www.forces.gc.ca/en/caf-community-pension-reg-post-march-2007/benefits.page#q4

 
The intent of the Regular Force pension plan is to provide you with 2% of the average of your best five years for each year of service.  It is a benefit that is combined with the CPP.  You can view it as being made up of three parts:

1.  For average earnings that are above the average YMPE at retirement, you will receive 2% per year of paid service, until you die.
2.  For average earnings up to the average YPME at retirement, you will receive 1.375% per year of paid service, until you die.  (Unless you were born before 1946)
3.  For average earnings up to the average YPME at retirement, you will receive 0.625% per year of paid service, until you reach age 65.  (Unless you were born before 1946)  This is the Bridge Benefit.


So, very simplified, if your five year average salary was $60000, and the average YMPE at the time you retire was $50000, and you served for 25 years, then your pension would be:

1.  Earnings above YMPE = ($60000 - $50000) = $10000 x 2% x 25 years = $5000 for life
2.  Earnings up to YMPE = $50000 x 1.375% x 25 years = $17187.50 for life
3.  Earnings up to YMPE = $50000 x 0.625% x 25 years = $7812.50 until age 65

So, until age 65, you would receive $5000+17187.50+7812.50 = $30000 per year from the CFSA; at 65 and above you'd receive $5000+17817.50 = $22817.50 from the CFSA, plus your CPP benefits.

(This ignores any indexing of the pension)


The formula assumes that you will draw CPP at age 65, and so the benefit paid by the CFSA is reduced at age 65.  That reduction may or may not be equal to the amount of CPP you receive, depending on a wide number of variables (you may contribute to CPP for employment outside the CAF before or after you join; whether you draw CPP early or late; etc).  If the CFSA was not reduced at age 65, then member contributions to the CFSA would have to be significantly increased - the formulas are based on the assumption that that reduction will take place.


If, when you start drawing your pension, you have 25 years of paid service, are 55 or older with 30 years of pensionable service*, are 60 years old, have 10 years of pensionable service and are retired due to disability, or under certain scenarios in the event of a reduction of the strength of the CAF, you will receive an unreduced pension.

However, if you don't meet any of those conditions when you start to draw your pension it will be reduced. (If you defer your pension to age 60, then it will not be reduced). One point to consider on the reduction: it's taken off the amount excluding the bridge benefit.  In other words, if the reduction is $100 per month, it will be $100 per month after you turn 65 as well; the reduction is not shared proportionately with the bridge benefit.

Reductions are complex, and are spelled out in the CFSA, article 18 (http://laws-lois.justice.gc.ca/eng/acts/C-17/page-8.html#h-13)  Other reductions may occur following divorce; but that is far too complex for this relatively simple discussion.


Pensions are complex.  It's in your best interest to read up on them, ask questions about them, and not to take advice from strangers on the internet about them (present company included).  They are also only one part of retirement planning.  For example, you can only be a member of the retirement medical and dental plans if you receive a pension.  So, if you defer your pension to age 60, you will not be eligible for medical or dental coverage until then.  Once again, it is in your best interest to learn as much as possible.  And it's in your best interest to start planning very early for your retirement; a SCAN seminar two months before is far, far too late.


*Paid service and pensionable service are not the same.
 
Thank you for the detailed reply.

It's good to confirm that in order to receive pension (full), you must have at least 25 years of service or wait until 60 (if less than 25 years in but more than 2). I assume the 55 w/ 30 years of pensionable service is for jobs before/after serving in CAF (to reach the 30 years)?

And from the link you provided it looks like the earliest one can start receiving pension if less than 25 years of service is 50 years old. However, I can't really understand their wording how they calculate the reduced pension.
The amount of the annual allowance is equal to the amount of the deferred annuity, reduced by the product obtained by multiplying five per cent of the amount of that annuity by the number of years by which the contributor’s age in years, to the nearest one-tenth of a year, at the time the allowance is payable is less than 60.
Is it saying the difference to 60 starting at 50?

So let's say 20 years at $60000 and start receiving pension when hitting 50.

That's $24000 per year - (0.05*10)% = $12000 per year?
and if instead drawing at 50, one waits until 55, then it's $24000 - (0.05*5)% = $18000?
 
Once you have 25 years of paid service there is no reduction, regardless of age.  Join at 17?  Retire at 42 with an unreduced pension.  An annual allowance scenario only applies to someone not entitled to an unreduced pension, who decides not to defer their pension.

Your calculations are correct for 20 years / 50 years old scenario - but those would only be the amounts to age 65; at that point the bridge benefit is removed, and the bridge benefit is NOT changed by the reduction formula - that is, the bridge benefit is calculated based on the full amount you would have received before the reduction for taking the pension early.

The 55/30 combination could be someone with prior RCMP or public service time they have transferred in to the CFSA.  Or it could be a person with Reserve service who is in the Reg F plan with less than 25 years of paid service, but with 30 or more years of pensionable service.
 
Cheers. I understand it a lot better now.

Regarding the bridge benefit ending at 65, what exactly meant by that?
but those would only be the amounts to age 65; at that point the bridge benefit is removed, and the bridge benefit is NOT changed by the reduction formula - that is, the bridge benefit is calculated based on the full amount you would have received before the reduction for taking the pension early.

From what I understood, yes the bridge ends at 65 and get's replaced by CPP, which from my understanding it can be higher/lower, depending how much more you worked and how many years the contributions were maxed.
 
Throwing out some numbers: Let's assume your pension (unreduced) would be $10000 per year, which includes $2500 in the bridge benefit.  Let's also assume that you leave the CAF at age 58 with 20 years of service complete.  (Yes, it's a very small pension - but round numbers are easier to use).

So, your choices would be to draw your pension at 58 or at 60.

If you draw at 60: $10000 per year to age 65, then $10000-2500 = $7500 per year after.

If you draw at age 58, you are 2 years below 60.  So your reduction would be 5% x 2 = 10% of your original amount.  So you'd receive $9000 per year to age 65.  At 65, the bridge benefit would be removed, so you'd get $9000 - 2500 = $6500 per year afterwards.


In other words, the bridge benefit is calculated on the unreduced annuity, even if you take it reduced. 
 
Got it!

Cheers! Very helpful. And last thing to confirm, just like you said in your second post, someone joining at 17 and retire at 42 after 25 years. They can start cashing unreduced pension immediately at 42 correct? They don't have to wait to 50 or 60 to cash their 25 years unreduced pension correct?
 
Hi all.  Just curious if anyone knows what the current wait times are like for pension and severance pay?  Thanks.
 
I released in Sept with my final day after retirement leave the 1st of Oct. I was told the severance pay would be sometime in January (maybe). I had not taken anything before as PIL. As far as my pension I haven't received anything yet and someone who released a week before was told his would be in December or possibly January. I'm not sure if this is accurate as I haven't received anything yet. Hope this helps.
 
Hubby released end of July, signed all pension paperwork end of August and has seen nothing yet. We keep being told that release digest is not done yet and they are extremely behind.
 
These wait times seem ridiculous!
I may put a memo in at the first of the year just in case I decide to retire.... every year for the next 10 years.
Please tell me they pay you interest when that first pension check (several months worth at once) finally comes in.
Do you know what the people I work with do if they aren't done all their work by 16h00? 
They stay later..... every night until they are caught up!
 
I sent an email yesterday to the pension folks asking how long it takes.  They got back to me today stating it would be a 3 to 4 month wait.  They need to hire more staff as this is totally unacceptable.
 
Of all the discussions I have read on here over these last few years, this is always the one that surprises me most.

 
It also shows how much their performance varies over time.  When I pulled the pin in Sep 2011, my severance was deposited in less than 30 days, and my pension cheque went into the bank exactly 30 days after my release.
 
In the computer age, this is unacceptable.  It should be swift, accurate and painless.  Other agencies are accomplishing this in a reasonable amount of time, there is no reason we cannot as well.  It's not like we're demobbing the amounts we did in 45.
 
Not all legacy information has been effectively digitized. So there is still a large amount of information that has to be manually reviewed and validated.  The cost to digitize everything would be prohibitive.
 
Sure, I accept that.  But really, how many people are releasing each month?  Not thousands and thousands.  Should be manageable.
 
Occam said:
It also shows how much their performance varies over time.  When I pulled the pin in Sep 2011, my severance was deposited in less than 30 days, and my pension cheque went into the bank exactly 30 days after my release.
jollyjacktar said:
In the computer age, this is unacceptable.  It should be swift, accurate and painless.  Other agencies are accomplishing this in a reasonable amount of time, there is no reason we cannot as well.  It's not like we're demobbing the amounts we did in 45.

Just be thankful you're not waiting on a Reserve pension ::)
 
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