How much service is needed in order to receive a pension at retirement?
Plan members must have at least 5 years of pensionable service. This is the vesting period of the USPP. Vesting refers to the right of an employee to a lifetime pension.
Under the USPP a plan member is not required to have 5 consecutive years of pensionable service in order to be vested. The vesting period can consist of a number of periods of service that add up to a total of at least 5 years.
How is the amount of the pension benefit calculated?
The USPP is integrated with the CPP.
The lifetime pension benefit is determined by the following formula:
- 1.4% of the best three year average salary (up to the three year average YMPE*)
- Multiplied by years of pensionable service
- Plus
- 2% of the best three year average salary (in excess of the average YMPE*)
- Multiplied by years of pensionable service
- Plan members who retire prior to age 65 will also receive a “Bridge Benefit.” This benefit is payable until age 65 and is determined by the following formula:
- 0.6% of the best three year average salary up to the average YMPE*
* YMPE is the Year’s Maximum Pensionable Earnings as defined under the Canada Pension Plan. For the purpose of determining one’s pension entitlement, the three year average YMPE is the average of the YMPE in the three years immediately prior to the month of retirement.
How is the best three year average salary determined?
The average is based upon the total of three individual continuous twelve month segments divided by three. The date of termination dictates what the three individual segments will be.
| Calculation of Best Three Year Average Salary | ||||
|---|---|---|---|---|
| Assume plan member is retiring May 31, 2005. Pensionable earnings for the last five periods of June to May were as follows | ||||
| 1. | June 2004 | to | May 31, 2005 | $ 51,250 |
| 2. | June 2003 | to | May 31, 2004 | $ 50,100 |
| 3. | June 2002 | to | May 31, 2003 | $ 48,650 |
| 4. | June 2001 | to | May 31, 2002 | $ 47,200 |
| 5. | June 2000 | to | May 31, 2001 | $ 48,820 |
| The three year average would be the total of 1, 2 and 5 divided by a factor of 3 as follows: | $150,170, 3 = $50,057 | |||
What are the retirement options?
Under the USPP there are basically two retirement options – Normal and Early. (Note: for disability pension benefits please refer to “Eligibility for Disability Section”)
Normal Retirement Age sixty with a minimum of 5 years credited pensionable service
| Example One | |||||||
|---|---|---|---|---|---|---|---|
| NORMAL RETIREMENT (AGE 60) | |||||||
| Assume plan member is retiring at age 60. The average annual salary is $61,500, the average YMPE is $44,383 and credited pensionable service is 27 years. | |||||||
| Lifetime Pension | $44,383 | x | 27 years | x | 1.4% | = | $16,777 |
| $17,117 | x | 27 years | x | 2.0% | = | $ 9,243 | |
| Total Lifetime Pension: | $26,020 | ||||||
| Bridge Benefit | $44,383 | x | 27 years | x | 0.6% | = | $ 7,190* |
| Total Pension Payable until Age 65: | $33,210 | ||||||
| * Pension will be $33,210 until age 65 when bridge benefit of $7,190 will be removed | |||||||
Optional Early Retirement Any age with a minimum of 25 years credited pensionable service
| Example Two | |||||||
|---|---|---|---|---|---|---|---|
| EARLY RETIREMENT (MINIMUM 25 YEARS SERVICE) | |||||||
| Assume plan member is retiring at age 49. The average annual salary is $71,000, the average YMPE is $44,383 and credited pensionable service is 25 years. | |||||||
| Lifetime Pension | $44,383 | x | 25 Years | x | 1.4% | = | $15,534 |
| $26,617 | x | 25 years | x | 2.0% | = | $13,309 | |
| Total Lifetime Pension: | $28,843 | ||||||
| Bridge Benefit | $44,383 | x | x | 0.6% | = | $ 6,657* | |
| Total Pension Payable until Age 65: | $35,500 | ||||||
| * Pension will be $35,500 until age 65 when bridge benefit of $6,657 will be removed | |||||||
What should plan members do in preparation for retirement?
Plan members should consult with their Human Resources Department to ensure that they have been credited with all eligible pensionable service. This should be done several months in advance of the anticipated retirement date to allow for an investigation of any discrepancies. The application for pension should be forwarded by the employer, at least two months before the date of retirement in order to facilitate a smooth transfer from the employer payroll to the pensioner payroll.
What documents are required by pensions division?
The initial pension calculation is prepared by the employer and forwarded to Pension and Group Insurance Administration Division with the following:
- Termination Form
- Birth Certificate
- Copy of Group Insurance Continuation Form
- Birth Certificate of Spouse and/or Child (Required before survivor benefits can be paid)
- Calculation Of Entitlement
- TD1 – Personal Tax Credits Return
- TD1NF – Newfoundland Personal Tax Credits Return
- Marriage Certificate (Required before survivor benefits can be paid)
- Direct Deposit Information