Reserve Pension- Merged

[CountDC]

Umm.... CountDC
Reservists on Cl A & B are paying their CPP and EI contributions (though there was a time, a long time ago, when Class A did not contribute).

Did forget that they started on the CPP therefore I would agree that any period CPP was deducted then there should be an adjustment. For the periods prior (which there are still lots of mbrs that have time from) the full amount should be charged.

 

[geo]

CountDC,
Individuals have an annual maximum for CPP contributions.
There is an employer's share of CPP contributions.

If an individual has paid in more than necessary in any one given year, they get to claim back the excess at tax time.

As a working stiff for the last umpteen years, I have paid my full share of CPP & UI - regardless of what I earned on Class A & B.  So - again, CPP should not be a deciding factor - the only thing the CF would be doing is Poneying up their share of CPP contributions

 

[CountDC]

CountDC, I believe you have not understood what you have read.

That would depend on what you mean - looking back I realize the 7% people here are talking about is the interest not the payment calculation so yes I did misunderstand that. If you are talking about the CFAO then no - I did not understand what I have read.  


It is not exactly as simple as you make out. The CFAO states throughout, but utilizing this one specific column as an example "for service after 1965 but prior to 1 Apr 69, 6% minus the amount required for Contributions;". The 6% in this and all of the CFAO column "Amount to be Paid" refers to the Contribution Rate as a percentage of pay.

Further, the CFAO states throughout, but utilizing this one specific column as an example "of the pay at the rates in effect during those periods for the rank or ranks in the Regular Force corresponding to the rank or ranks held by the member in the Reserve Forces during that period and of the allowances prescribed to be part of pay by the CFS Regs applicable to the period of service, together with simple interest at 4% per annum from the middle of each fiscal year of such service to the date of election.

Now do you understand what you read?  I was merely using the CFAO to point out that the 7% contribution rate (see above) was around for a long time.  This CFAO is in relation to a mbr that is in the Reg F and buying back prior time so all that other info is meaningless to a res mbr buying back time..

First of all the Contribution Rates as a percentage of pay for 2008 are 4.9% up to YMPE, and 8.4% for pay over YMPE (Yearly Maximum Pensionable Earnings.YMPE = $43 700 in 2007, in other words maximum CPP). The rates increase annually 2006 to 2013. The delay in CIF means Reservists were caught in the increased rates, thus buy back was more expensive.

I am aware of the increase in rates as I see it every year in my pay and warned people about it as the message was out prior. Still don't understand your point there? CIF was delayed, reserve pension was held off again so it costs more.  As you stated you have 35 years then you should be aware that the reserve pension was in planning stages since at least the 70s (worked with a Col that was involved with it back then) so a delay should not be a surprise - nothing to be done about it as that's life.

The second major point is Reservists did not pay contributions based on pay at the rates in effect during those periods, but at rates of pay that were "Updated Pensionable Earnings".

I made $26,473 in 1986, not $70,514, but I paid the increased contribution rate on the $70 K, not the $26K. You would think that your best five years would be the last five years of service, when you are at your highest rank and pay incentive. I retired in Aug 07. My best five years were 1988 to 1992, after a couple of promotions. Then I paid 7% Compound Interest all the way back 35 years.

I do not agree with their system of calculating the payments if the mbr elects to buy back within the first year of eligibility.  It should be the same as when a mbr would CT from res to reg and elected in the first year - you paid based on the reg f pay scale for the rank held at the time you were buying back - ie in 1985 if a Pte(B) then you would pay based on the reg f Pte(B) pay scale for 1985 approx $950 not the currect $2k+.

Not passing full judgement yet on the CI versus SI as they really haven't put out a reason for it anywhere that I have seen. Maybe there is a valid reason or maybe it is just another cash grab by TB from the military members.

Geez - all this because I mistook peoples comments to be about buyback rate versus interest rate.  That's what I get for quickly reading something while working.

 

[CountDC]

CountDC,
Individuals have an annual maximum for CPP contributions.
There is an employer's share of CPP contributions.

If an individual has paid in more than necessary in any one given year, they get to claim back the excess at tax time.

As a working stiff for the last umpteen years, I have paid my full share of CPP & UI - regardless of what I earned on Class A & B.  So - again, CPP should not be a deciding factor - the only thing the CF would be doing is Poneying up their share of CPP contributions

Wish I could say I didn't know there was a max for CPP but after umpteen years myself I am.  I am also aware that an annual max is based on income earned so most people have not paid the max for that year when you add in their part time reserve pay that CPP was not deducted for therefore it would be a factor ie back to 1985 again - res did not pay CPP on part time (Cl A/Short B) service thus they have not maxed.

Again the mistake I made was that I mistook peoples comment in regards to 7% to be about payment rate and not interest.

 

[begbie]

I'm at 15 1/2 months and counting...

I'm just shy a year of waiting now... I guess I can expect to wait for a longer now.

 

[dapaterson]

After some chasing down, I was told that resources are limited and therefore priorities are set:  Those retired, those retiring, those nearing retirement.  Other files will be dealt with in order of receipt.  As I'm some time away from being in any of those groups, my file hovers in a continual state of "almost, but not quite". 

 

[geo]

DAP... closing in to my 3rd clasp...sounds like they don't think I'm close to retirement .....either.

 

[CountDC]

lol - even before the reserve pension came into effect it would take over a year to get a pension buyback calculation so be patient lads - this will take a while.  Just squirrel your money away for the day when it comes - as much as possible. Oh yeah - make sure you have all your docs in place - took me 5 years of fighting to get my pension straightened out.

 

[dapaterson]

CountDC:

The problem with getting docs squared away is that DND lost/destroyed/abandonned the old records in the Reserve Data System (RDS); they have yet to recover that data.

 

[Rifleman62]

CountDC

While you are waiting, the Compound Interest, in one form or another on that unknown amount of what you owe, continues to accumulate. Until you get the cost of buy back you cannot make payments on what you owe. Say for example the buy back cost was $150 K, and you had $100 K in RRSP's to transfer over to the RFPP, you cannot do this until they give you a buy back estimate. Therefore you continue to pay Compound Interest on total amount of $150 K, vice the reduced amount which, if you knew what it was, you may make additional monthly/annual payments to reduce thus saving CI.

Watched the stock market lately? My financial adviser stated that few, if any, RRSP's are getting 6/7 % CI return.

You should fill in your profile.

 

[CountDC]

CountDC

While you are waiting, the Compound Interest, in one form or another on that unknown amount of what you owe, continues to accumulate. Until you get the cost of buy back you cannot make payments on what you owe. Say for example the buy back cost was $150 K, and you had $100 K in RRSP's to transfer over to the RFPP, you cannot do this until they give you a buy back estimate. Therefore you continue to pay Compound Interest on total amount of $150 K, vice the reduced amount which, if you knew what it was, you may make additional monthly/annual payments to reduce thus saving CI.

That is why I said to squirrel it away - at least you have a chance to off set some of the bill when it finally comes in - nothing else you can do as waiting is part of the game.  I had to do it and so has everyone else that has done a buy back.  As I said - even before the reserve pension was in place it would take over a year to get the bill so no surprise that it still is.  If you are able to come up with the amount of time you are buying back then you can use the pension calculator to come up with an estimate of your bill.  Figure out the payments from this number, add any extra you can afford and squirell it away.  Don't want to go through all that work then save every penney you can.

Watched the stock market lately? My financial adviser stated that few, if any, RRSP's are getting 6/7 % CI return.

No - I'm too busy watching my 4 kids and enjoying life with them to watch something I can not afford as the government takes almost half my pay for pension, ei, taxes, LTD, etc, etc, etc. Unfortunately I can't afford a financial advisor which doesn't matter because I would just spend the money on the kids anyway.

 

[CountDC]

CountDC:

The problem with getting docs squared away is that DND lost/destroyed/abandonned the old records in the Reserve Data System (RDS); they have yet to recover that data.

Spread the blame around - not just the RDS. Lots of reserve units used to (may still do it) bring in the troops on occasion to help the clerks in the office. Sometimes they would be given the task of stripping the files because the clerk didn't want to and didn't care enough about them. This would sometimes result in paperwork that should not have been removed going in the garbage.  Don't forget yourself - if you are like I was then you most likely have not held onto all the paperwork you have received over the years - route letters, claims, pay statements, TOS (contract) that could help you prove your case.  You can do your part now by holding on to any you get and request a copy of your pers file. I spent 5 years getting my pension buy back straight because I didn't keep the docs and the reg f clerk at base did not know what he was doing and removed all the pay docs from my pers file when he received it.  Eventually I ended up contacting a clerk at DAP that worked with the RDS and he sent me a print out of my pay record. A lot of back and forth with the pension often with long waits for a response to every letter I sent but eventually it worked.

 

[begbie]

CountDC

While you are waiting, the Compound Interest, in one form or another on that unknown amount of what you owe, continues to accumulate. Until you get the cost of buy back you cannot make payments on what you owe. Say for example the buy back cost was $150 K, and you had $100 K in RRSP's to transfer over to the RFPP, you cannot do this until they give you a buy back estimate. Therefore you continue to pay Compound Interest on total amount of $150 K, vice the reduced amount which, if you knew what it was, you may make additional monthly/annual payments to reduce thus saving CI.

Watched the stock market lately? My financial adviser stated that few, if any, RRSP's are getting 6/7 % CI return.

You should fill in your profile.

I was under the impression that once you got your buyback estimate into the system, the timeclock on CI stopped which meant that CI was only applied from 01 Mar 07 to the date your estimate entered the system.  You're suggesting that I am wrong (happens all the time).

Maybe that's true in my case because I have elected for the lump-sum buyback?  If not, my buyback just got a whole lot more expensive. 

Is CI applied only on the portion of the buyback that is being bought back over time from the date your estimate entered the system?

 

[54/102 CEF]

The clock was supposed to stop when you "elected to buy back."

This whole effort reeks of gross incompetance.

DND pays pension to how many and they can't get this stood up?

 

[Rifleman62]

Once you elect to buy back, the 7% CI stops on the amount you are buying back (either all, or whatever % you decide to buy back). But the 7% CI is replaced the month following the date of your election with 4% CI on the amount you still owe on your buy back. I have previously given estimates of my buy back as to how it works. That's why my buy back costs $223 K in interest alone. The 7% CI on the 35 calender years I bought back, plus the 20 years of interest on the amount still outstanding after the transfer of my RRSP's  equals $223 K in interest costs.

The 7% CI is applied to every penny you are buying back from the earlest calender year of service to a maximum of 35 calender years (1973). If you bought back $1000 from 1988, you pay 7% CI on that $1000 from 1988 to the date of election, then 30 days latter, if you had not paid that $1000 plus accumulated interest, you start paying 4% CI on the $1000 and accumulated interest until it is paid.

Do not forget, that if you decide not to buy back all of your pension, and say decide to buy back 50%, that 50% is based on the total cost as if you bought all of it back. You are still paying the the cost of the entire pension buy back, all the 7% CI, all the years of service, then they take 50% of that total cost figure. You cannot pick and choose what years of service to buy back: all or a % of all.

Hope that answers your questions. If not ask away. But, to be sure, they are really screwing us on buy back, and the head shed let them get away with it. I am attempting to get "them" to see the light.

Posted previously.

Re: Reserve Pension
« Reply #514 on: January 24, 2008, 18:10:32 » 

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The following is from the CFSA Regulations.

Manner of Payment for Elective Pensionable Service

14. (1) If, under paragraph 9(1)(b) of the Act, a contributor — other than a contributor who is a member of the reserve force or, in respect of a top-up election under section 14.2, a contributor who was a member of the reserve force — has exercised an option to pay in instalments for pensionable service, those payments shall be made by reservation from pay and allowances or otherwise, for life or for a period of years not greater than for life, and are payable in the following manner:

(a) the first instalment is due and payable on the first day of the month immediately following the month of election and succeeding instalments monthly after that time during the term corresponding to the plan of payment selected by the contributor, computed in accordance with Canadian Life Table No. 2 (1941), Males four per cent or Females four per cent, as the case may be; and

(b) the contributor may amend the plan of payment to provide for payment of the instalments still to be paid in a lump sum or by larger monthly instalments on a basis similar to that described in paragraph (a), calculated as of the date of the amendment.

The following is from the RFP Regulations.

Instalments 

18. (1) The instalments shall be payable in equal amounts that may not be less than $5.00, except the last one, and be calculated using the mortality rates set out in the Complete life table, Canada, 1995-97, published by Statistics Canada, and interest at four per cent compounded annually.

When payable (2) he instalments shall be payable on the first day of each month following the month of the election until the earlier of

(a) the end of the period chosen by the participant ending before the later of 20 years and the participant's 65th birthday, and

(b) the death of the participant.

See the difference? When you make your election, the 7% CI on the buy back stops, and is replaced with 4% CI, plus a Mortality Charge (life insurance) on the amount you owe. For example, say you elected in Apr, made a lump sum payment of $200,000, still owe $100,000. You will be charged 4% CI on that $100,000 commencing May. Plus the Mortality Charge. If you took the maximum 20 year repayment option, that $100,000 grows to $175,000 due to the 4% CI. Plus the Mortality Charge of course, which will add thousands more depending on your age.

Personally I am already paying 54% of the buy back in 7% CI costs. Add another $100K plus, plus, plus, and I am regioning over a quarter of a million dollars in interest alone. My personal problem. Just to keep you informed of what is really going on. I still do not have, after 6 months, all the figures.

What does the reserve community on this board think of that?

 

[begbie]

Once you elect to buy back, the 7% CI stops on the amount you are buying back (either all, or whatever % you decide to buy back). But the 7% CI is replaced the month following the date of your election with 4% CI on the amount you still owe on your buy back. I have previously given estimates of my buy back as to how it works. That's why my buy back costs $223 K in interest alone. The 7% CI on the 35 calender years I bought back, plus the 20 years of interest on the amount still outstanding after the transfer of my RRSP's  equals $223 K in interest costs.

The 7% CI is applied to every penny you are buying back from the earlest calender year of service to a maximum of 35 calender years (1973). If you bought back $1000 from 1988, you pay 7% CI on that $1000 from 1988 to the date of election, then 30 days latter, if you had not paid that $1000 plus accumulated interest, you start paying 4% CI on the $1000 and accumulated interest until it is paid.

Do not forget, that if you decide not to buy back all of your pension, and say decide to buy back 50%, that 50% is based on the total cost as if you bought all of it back. You are still paying the the cost of the entire pension buy back, all the 7% CI, all the years of service, then they take 50% of that total cost figure. You cannot pick and choose what years of service to buy back: all or a % of all.

Hope that answers your questions. If not ask away. But, to be sure, they are really screwing us on buy back, and the head shed let them get away with it. I am attempting to get "them" to see the light.

Crystal clear.  Good explanation.  Thanks.

Did they provide you with a breakdown of the costs or did you have to back out the math yourself?  I will be curious to see how it works out for me.

I do have one follow up question though... is the 4% SI accruing now even though they have yet to inform the majority of the masses what the final determination is?

 

[Rifleman62]

As I was one of the first, I received a Excel spread sheet, year by year.

To the best of my knowledge, and I sent many, many emails, and after many, many phone calls, if you have elected you are being charged interest. If you have not elected, you are being charged interest.

Loan sharks.

 

[CountDC]

I have a problem with the 7% charge - that is fine for the period that reserves did not pay into CPP but for the periods that CPP was paid it should be adjusted accordingly same as when you CT to regs and buyback.  For example when I did my buyback if the CPP rate for that year was 2.5% then I paid 4.5% to the pension buyback.

The 4% I do not see as a problem as that is the same rate as I paid and has been in effect for buy backs for a long time.  This is supposed to be the average amount that the pension fund would have earned off your contributions over the years if you had paid into it from the start.  Of course as reservists we were not able to pay into the fund, therefore no interest paid into the fund  therefore we pay the interest.

WOW - when I did my buy back I had to indicate the period I was buying back starting from current date and working back so I assumed that the reserve buy back would enable you to do the same - ie that you could indicate I want to buy back from 1 Jan 2005 to 31 Dec 2007 - and that is what you paid on.  Why would you pay for a period that you were not getting to claim??

To me the 2 big concerns is the 7% not being adjusted and paying at current Reg F rates instead of Reg F rate in effect at the time of service if election is made in first year. I know from doing a comparison of my pension buyback and some others that this does make a big difference in what you pay. Simple comparision - say the pay rate was $1k at time served and $3k now at 4% interest paid over 25 years the monthly payments would be $3.61 and $10.83- a difference of $7.22. This is an extra $86.67 dollars for each year,  $2,166.67
over 25 years. Like I say - simple comparison but it gives you an idea of how the cost explodes on the interest.

 

[begbie]

I find it interesting that the justification for the 7% CI appears to the lack of CPP contributions prior to the CIF date.  My situation probably isn't too far removed from the majority, if it's as I suspect, only a small proportion of reservists do this for a living.  In my case, with the exception of two years of service while at university, I have been working on civy street maxing out on CPP every year.  And since I started paying CPP on my Cl A pay, I've been getting it all back at tax time since I max out with my civy job.  It seems redundant to me.

Has anyone given any thought to a grievance of any kind over some of this.  I recall this thread discussing this option over the 7% CI in the past.  This seems like a rather large target to go after.  But what has had me ticked off for the last few days is the accruing of 4% SI on my buyback since I elected last July.

To me, at least strategically, I see the difference between taking on the system over the 7% CI versus the 4% SI.  It's two different issues (design vs. poor administration) and it's on the poor administration issue that I think we could have a reasonable opportunity to make a case.  It shouldn't cost personnel any extra of their hard earned cash to pay for poor administration.

 

[geo]

Big point to consider is that the Employer is supposed to contribute the same amount of CPP $$ as the Employee.
So, it the Employee did not get assessed CPP.... neither did the Employer...

I hope DND is going to pony up some cash too