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.
