Actuarial Valuation – an assessment of the financial position of a pension plan that compares the plan’s assets versus liabilities and outlines contribution requirements for the period covered by the report.  The report must be prepared and signed by an Actuary who is a Fellow of the Canadian Institute of Actuaries.  The Actuary uses economic and demographic assumptions to determine the expected future payouts from the plan to determine the actuarial liabilities.

Commuted value – the lump sum present value of the pension that you have earned to-date. The assumptions used to determine the present value are set by legislation and the Canadian Institute of Actuaries.

Consumer Price Index (CPI) – a measure of the degree of change in the price of goods and services purchased by Canadian consumers and is determined monthly by Statistics Canada.

Directives – are issued by the Superintendent of Pensions to outline requirements for documentation and processes to be used by pension plan administrators, consultants, and financial institutions. For existing directives from the Superintendent, visit here.

Locked-in Retirement Savings Arrangement – a financial product that is approved to receive transfers of locked-in pension entitlements.  Locked-in retirement savings arrangements are designed to provide a gradual income in retirement and the rules that apply to these products are set by legislation and the directives of the Superintendent of Pensions. For more details, visit here.

Pension Indexing – an indexed pension is one that is increased periodically.  The increases may be a fixed amount defined in the plan provisions, may be based on the funded status of the pension plan, or may be based on a formula that uses all, or a portion, of the increase in the Consumer Price Index (CPI).  Some pension plans provide indexing each year whereas others provide ad hoc indexing as determined by the plan sponsor.

Principal beneficiary – spouse or cohabiting partner. A principal beneficiary includes same-sex relationships. A cohabiting partner may include someone you have lived with for one year, or if you have a spouse, someone other than your spouse with whom you have lived with for 3 consecutive years. You must have lived with a spouse or cohabiting partner within the past year.

Small Balance – for an individual who has ceased to be a member of a pension plan it means that your annual pension payable at normal retirement age is less than 4% of the YMPE or that the commuted value of your pension benefit is less than 10% of the YMPE and the pension plan permits small balance unlocking. For owners of a locked-in retirement savings arrangement, a small balance means the value of money held in all locked-in retirement savings arrangements is less than 10% of the YMPE or, if you have reached the eligibility age for starting to receive an income from your locked-in money, the value of money held in all locked-in retirement savings arrangements is less than 40% of the YMPE.

Vested – you are entitled to a pension at retirement. If you are not vested, you are only entitled to a refund of your pension contributions plus interest.

Year’s Maximum Pensionable Earnings (YMPE) – the year’s maximum pensionable earnings as defined under the Canada Pension Plan. For listing of annual maximums, visit here.