Reserve Pension- Merged

[Rifleman62]

RLD. I realise you were offering assistance. I was required by CRA to transfer all my RRSPs to the RFPP, plus I still owed lots more as you will see below.

Posted previously. Although “private info”, I posted the following financial info to give others some indication of the cost.:

Reserve Pension Buyback

-    cost of my buy back was $274.6 K, of which $148.1 K was interest, and $126.5 K was principal (but see additional financing point below);

-        my buy back @ 4% Simple Interest (SI) should have cost $44.5 K interest only;

-        my buy back @ 7% Compound Interest (CI) actually cost $148.1 K interest only, a increase in interest costs of $103.6 K;

-        this increase in interest costs meant I still owed $97 K after all the lump sum payments;

-        Additional financing of the $97 K over the maximum of 20 years cost an additional $74 K interest (some mortality charge in this amount) for a total additional payment of $171.5 K over the 20 years. So due to the extra $103.6 K in 7% compound interest, I have to pay an additional $171.5 K over 20 years.

-        total interest for my buy back was $148.1K on the principal + $74 K on the additional financing = $222.1 K interest on principal of $126.5 K; and

- your best five years would normally be your last five years (due to possible promotion in that 5 years, pay raises, incentive increases). Incredibly my best five years were 1988 to 92. This is due to the “Updated Pensionable Earnings” (UPE) and the 7% CI, a double whammy. Therefore you buy back the pension on the Adjusted Updated Pensionable Earnings (AUPE) and 7% CI is added. Example 1988 I made $40.4 K. after AUPE this becomes $92.7 K. So I bought back $92.7 K, paid 7% CI from 1988, and due to the delay in the coming into force (CIF), paid two increases in contribution rates for pension. Note that a full time Reserve LCol, incentive 1, twenty years later, makes $92.8 K (2008 rates of pay). In fact what I bought back from 20 years ago is $30 K more than I would make today in the same rank/incentive!!

Posted Jun 08:  Note that after you make your election, you pay 4% COMPOUND INTEREST on what you owe. Not 4% Simple Interest. On my outstanding buy back that 4% Compound Interest translates to 6.36 % from the TD Canada Trust Mortgage calculator. I took the amount I owe, repayable over 20 years and it comes out to almost the nickel of what I pay monthly. Cannot break out the mortality charge (insurance) from the 6.36%.

Posted May 08:  On top of the near quarter of a million dollars in COMPOUND INTEREST alone for my buy back, I have received the confirmation from my Chartered Accountant, that due to tax laws only 47% of the annual payments I make over 20 years is tax deductable to a life time limit of 37% of the total amount financed. When the life time limit is reached, no income tax deduction.The reason is, in the eyes of CRA my elected reserve service is service "while not a contributor", meaning the time of the service, I was not a CF Pension Plan contributor.

Even though I have the RRSP room, I cannot claim a tax deduction of more than 47% of the annual repayment (which I owe due to the cost of the CI of the buy back, estimated at 3 times the cost at 4% SI). So financing over 20 years cost an additional $74 of CI plus, the $148K CI for the total buy back.

What that means is more screwing over by the loan sharks at NDHQ who negotiated the Reserve Pension on our behalf. It also means less cash flow as the monthly payment is in after tax dollars, and I can not claim a deduction for all of it which means more income tax to be paid equal reduced net pension to live on. Can't wait to I reach the life time limit of $63K!!

 

[Rifleman62]

I forgot to add:  "Interest can either be compounded monthly or semi annually depending on the type of mortgage you have". That was from TD Canada Trust. Therefore the 6.36 % I am paying on the installment plan, as stated above, is 6.36% Compound Interest vice simple interest. It does include the morality charge, which I can't break out.
When speaking to a financial adviser, you should be keen to ask what is the anticipated rate of return on your RRSPs, then balance the non guaranteed anticipated rate of return against what you will be charged on installments by Pension Services.

 

[dapaterson]

(Edit to fix URL - Sidenote: Why hasn't the CF abandonned the Message system????)



CANFORGEN 007/10 CMP 003/10 081524Z JAN 10
CF PENSIONS - PAST RESERVE FORCE SERVICE AND TOP UP ELECTIONS DEADLINE
UNCLASSIFIED


REFS: A. CANADIAN FORCES SUPERANNUATION ACT
B. CANADIAN FORCES SUPERANNUATION REGULATIONS
C. RESERVE FORCE PENSION PLAN REGULATIONS



1. THE PURPOSE OF THIS MESSAGE IS TO REMIND CF PERSONNEL THAT THE DEADLINE TO ELECT TO BUY BACK PREVIOUS RESERVE FORCE SERVICE AND TOP UP CONTRIBUTIONS MADE UNDER THE RESERVE FORCE PENSION PLAN IS THE LATER OF:


  A. ONE YEAR AFTER THE DATE OF THE WRITTEN NOTICE THAT INFORMED CF PERSONNEL OF THEIR ENTITLEMENT TO MAKE THE ELECTION AND


  B. 1 MARCH 2010


2. THE DEADLINE TO BUY BACK PREVIOUS RESERVE FORCE SERVICE DOES NOT APPLY TO CF PERSONNEL WHO ENROLLED IN THE REGULAR FORCE PRIOR TO 1 MARCH 2007 AND REMAIN A CONTRIBUTOR


3. THE DEADLINE TO TOP UP CONTRIBUTIONS MADE AS A PARTICIPANT UNDER THE RESERVE FORCE PENSION PLAN APPLIES TO RESERVE FORCE PERSONNEL WHO HAVE QUALIFIED TO CONTRIBUTE UNDER THE REGULAR FORCE PENSION PLAN


4. PERSONNEL ARE ENCOURAGED TO VISIT THE RESERVE PENSION BUYBACK PROGRAM WEBSITE AT THE FOLLOWING INTERNET ADDRESS: HTTP://WWW.CMP-CPM.FORCES.GC.CA/PS/CB-RAS/RFP-PRP/INDEX-ENG.ASP AND TO NOTE THE CONTACT INFORMATION FOR THE RESERVE PENSION BUYBACK DOCUMENTATION SUPPORT CELL


5. PERSONNEL ARE ALSO ENCOURAGED TO REQUEST AN RPSR PENSION REPORT FROM THEIR PAY CLERKS TO ESTABLISH PRIOR EARNINGS


6. PLEASE VISIT OUR WEBSITE FOR MORE INFORMATION AT HTTP://WWW.CMP-CPM.FORCES.GC.CA/DGCB-DGRAS/PS/PEN/INDEX-ENG.ASP ON THE INTERNET OR VIA INTRANET AT HTTP://HR.OTTAWA-HULL.MIL.CA/DGCB/DPSP/ENGRAPH/PENSIONRETIREMENT_E.ASP?SIDESECTION=4&SIDECAT=15


7. SIGNED BY MGEN W. SEMIANIW, CMP

 

[Lex Parsimoniae]

What would you replace the message system with?  Keep in mind that not all deployed units have internet access so it would need to be something that works with LF.

 

[CountDC]

Letters delivered by pony express.

 

[Lex Parsimoniae]

Letters delivered by pony express.

:

 

[dapaterson]

/ off topic

Any deployment can get IRIDIUM and other comms.  Besides, the messaging system and its mighty six bits of data per character may be useful in certain circumstances; but for widespread communications it's past its prime.

ALL CAPS WITHOUT (UNDERSCORE) AND OTHER CHARACTERS NEEDED TO COMMUNICATE URLS IS NO LONGER ACCEPTABLE.

Internet infrastructure is cheap, affordable, error-resistant, and ubiquitous.  Maintaining the message system as a backup - not a bad idea.  Continuing to rely on it when there are better systems for mass communication - stupid.

 

[Lex Parsimoniae]

/ off topic

Any deployment can get IRIDIUM and other comms.  Besides, the messaging system and its mighty six bits of data per character may be useful in certain circumstances; but for widespread communications it's past its prime.

ALL CAPS WITHOUT (UNDERSCORE) AND OTHER CHARACTERS NEEDED TO COMMUNICATE URLS IS NO LONGER ACCEPTABLE.

Internet infrastructure is cheap, affordable, error-resistant, and ubiquitous.  Maintaining the message system as a backup - not a bad idea.  Continuing to rely on it when there are better systems for mass communication - stupid.

Not all deployed units have access to IRIDIUM.  In the Navy, INMARSAT leases are carefully managed due to the cost per minute ($10/min in 2009).  Also some units aren't IRIDIUM capable (Victoria Class submarines come to mind but there may be others). 

I agree with your point that there are better systems available.  The CF is working on replacing the Defence Message Handling System and the Automated Defence Data Network as part of the Canada First Defence Strategy.  From the Reports on Plans and Priorities 2007-08:

"the IM Gp will lead the efforts to deliver a fully integrated command and control information system (C2IS) by converging existing environmentally "stove-piped" networks [the TITAN-CF command system network, Maritime Command Information Network (MCOIN), Air Force Command and Control Information System (AFCCIS), Land Force Command and Control System (LFC2S), Military Message Handling System (MMHS) and Automated Defence Data Network (ADDN)] networks now in service."  http://www.tbs-sct.gc.ca/rpp/2007-2008/nd-dn/nd-dn02-eng.asp

My point was/is that any replacement system needs to be LF capable.  By default that probably means all caps because all caps only require one bit of information per letter and that matters at 75 baud transmission rates (eliminating all caps doubles the length of the transmission because each letter now needs to be identified as eithe upper or lower case).  Any replacement system also need to be compatible with Allied (ABCA and NZ) and NATO communication formats so that we can work together.

Apoligize for getting off topic.

/BT

 

[dapaterson]

Whenever I think I've seen the end of my buyback, they come back to me.

Today, I received a letter from the pension office.  All Reservists enrolled in the Reg F pension plan on or prior to June 2009 will have their top-up re-assessed (that is, the amount paid on top of the Reserve Force pension plan buyback), since, following an OAG audit, errors were discovered in their calculation methodology.


In 18 days it will be three years since I elected to buy back my prior service.  They still don't know what they are doing.

In no other entity would this degree of lack of competence be tolerated.  Given that senior military and civilian officials in DND sign off on the CFSA annual reports, will they be held accountable for this failing?

 

[Rifleman62]

I hope this does not become interesting. The option IAW the RFPP regulations is at para 24 (b) withdraw your election and para 25, get a refund.

Election not made

24. (1) A past earnings election is deemed not to have been made
(a) in the case of an election to count earnings as pensionable earnings from a period after December 31, 1989, if the Minister of National Revenue refuses to issue a certification under paragraph 147.1(10)(a) of the Income Tax Act;
(b) at the request of the person who made the election if they received erroneous or misleading information in writing as to the amount to be paid or the consequences of the election on their benefits, from a member of the Canadian Forces or a person employed in the public service who normally gives information as to those matters, and, in making the election, they honestly acted on that information; or
(c) if the person who made the election has not paid the amount to be paid under subsection 16(1) within the required period.

Refund

(2) The Minister shall refund any payments received from a plan, fund, or institution of a type referred to in paragraph 61(1)(a) to a plan, fund, or institution of the same type, at the direction of the person who made the election.

DAP: Did the letter state the time line for this recalculation? A phone number?  Interesting that OAG looked at this. I wonder what the terms of reference of the audit where. OAG was requested to look at the RFPP.

 

[kratz]

Members have been scrambling for the past month in order to respond to the buyback deadline. It has not been uncommon for at least 2- 3 pension related requests (forms, queries, access to documents ect...) daily at my Ship's Office or my 9r's office.

Last week after paying for my own mail, I discovered there were three additional members lined up at the base post office, all buying Canada Post's EXPRESS Post to get their pension packages into Ottawa on time.

If it is taking three years to get things sorted out for those who have already filed, the last minute rush will overwhelm the pension office.

 

[dapaterson]

Here`s the letter (with personal info removed).


Frontline staff answering the phone were not alerted to this issue yet, and are facing an avalanche of calls today as the deadline to elect under the RFPP approaches on Sunday.

 

[Rifleman62]

Thanks.

Just freaken great. This will take some time I bet due to the March 10 end date for elections.


Promotions, ORMMs and Ministers'  Commendations for all.

 

[Haggis]

Given that senior military and civilian officials in DND sign off on the CFSA annual reports, will they be held accountable for this failing?

:rofl:  You're a pretty funny guy!

 

[Bruce Monkhouse]

Besides, after years of being a member of these boards, it is my opinion that it is SOP at the senior levels to slap down those who bring forth the incompetence as opposed to stopping the incompetence.

 

[PuckChaser]

Today, I received a letter from the pension office.  All Reservists enrolled in the Reg F pension plan on or prior to June 2009 will have their top-up re-assessed (that is, the amount paid on top of the Reserve Force pension plan buyback), since, following an OAG audit, errors were discovered in their calculation methodology.

Is the only way to top up your pension to go through the reserve buyback? I just CT'd in March 09, nobody ever offered a topup for my Reg F pension.

 

[kratz]

Is the only way to top up your pension to go through the reserve buyback? I just CT'd in March 09, nobody ever offered a topup for my Reg F pension.

Contact your pay clerk and mention your concern. If you do not get a satisfactory answer, through your COC request an answer from the pension office. With the CIF of the reserve pension there are now some exceptions transfering between PRes and RegF service at a certain date. This will cause some people and their options to be missed due to systemic problems, so asking questions soonest to the appropriate office will offer you the widest options available for your pension planning.

 

[Proud Sup Tech]

I have just read through this whole line (yes I know slightly crazy, but honestly I don't really have that much time on my hands!) and no one whom has posted has talked about the type of situation I have.

After over 20 yrs reg force I retired and joined the Reserves (got offered a civie job that I thought was too good to turn down...) and in the last 10 years I have been serving full time.  I am trying to decide whether to buy back the last 10 years of time.  I can't get that calculator to work for me and I am not sure that I have all the facts I need to make a good decision.

I will have to pay back all the pension I have rec'd (plus interest) and pay into the plan (at 7% compound interest from what I have been reading). 

My question is, am I totally committed to going through with the buy back once I submit the request or can I turn it down after they finally do all the calculations and send me a letter? (Which may take up to 2 years from what I have been reading.)  Does anyone out there have the relevant experience or information for me?  I would really like to have as much information as possible so that I can make an informed decision.

I realise that I am down to the wire.  I read somewhere that we can apply on-line also, if so what is the site?  The lack of information about this is totally amazing but they can really keep us up to date on non essential info.

Thank you for your help.  I hope that you all have a great weekend.

 

[Monsoon]

PST - I've just crunched some numbers based on your question (along with some assumptions about your "best five" in the Reg F and Res). It also assumes no specialist pay. Here's what I get:

You now make about $67K in Reg F pension and class B (including annuitant break of service). To pay back what you've received in pension over the past 10 years will cost you about $220K, or 17.5K a year over 35 years (7% interest - a pretty good bank rate). You'll also need to pay about $33K in pension contributions to buy your Res service, or about $2.5K annually over 35 years (also 7% interest).

Bottom line: you'll need to pay back $20K a year for the next 35 years to top up your pension. In the meantime, you'll be living off about $13.7K a year (your new pension, less buyback/repayment costs). After all that pain, and at the age of no less that 72 years young, you'll start getting your full new pension of $33.5K a year.

Maybe I fudged the calculations or assumptions, but that looks like a no-way-Jose proposition to me. I'd just stick with your current $22K pension; otherwise you'll end up in the red unless you live to the age of 96 (a loss of about $8K a year for the 35 year repayment period, recouped with a pension increase of $11.7K over 24 years). Yikes!

 

[Rifleman62]

Lets see. The RFPP regulations are Governor in Council. You cannot use the redress system. You cannot file a complaint to the CF Ombudsman. As one member did, he spoke directly to the Minister, who promiced he would look into it. Back in his office, and out of reach, the Minister's staff pooh pooed criticism of the RFPP, and answered with the corporate line. The VCDS, responsible for CMP, reads a detailed letter stating the inequities of the planned RFPP. He does nothing. The CDS (the former VCDS) is given a short brief protesting the RFPP. Nothing. The Chief of Reserves and Cadets has numerous times been briefed on rip off of the RFPP. He does nothing. The Auditor General of Canada is requested to look at the irregularities of the RFPP.

Dear Rifleman62

Thank you for your email. We do apologize for the delay in responding.

It is not within the mandate of the Office of the Auditor General of Canada to resolve or mediate the complaints that individuals or groups of individuals may have against government departments. Therefore, we cannot resolve the specific situation that you have brought to our attention.

While the issue you raise is an important one, we are sure you can appreciate that we cannot address all of the potential audit issues that come to our attention. Each request is carefully considered in light of our mandate, the matter’s significance, our audit schedule, and our available resources.  A copy of your email has been forwarded to the audit teams responsible for DND, for their information. However, we cannot commit to auditing the issue you have raised.

I suggest you contact the National Defence and Canadian Forces Ombudsman: http://www.ombudsman.forces.gc.ca/index-eng.asp.

Sincerely,

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What is a guy to do???  (rhetorical question)