Approaching Retirement

Preparing for Retirement

What should I do to prepare for retirement?

Attend the Retirement Ready Webinar

Like many Newfoundlanders, you’re likely dreaming of those days of retirement freedom not far off on the horizon. But before you get there, we want to get you well prepared and planning for the process with our Retirement Ready Webinar.

We encourage participants who are within 5 years of being pension eligible to enroll. In this webinar, we will cover all of the information you need to know to properly plan for retirement with your Public Service Pension Plan (PSPP). Our goal is to educate you on all of the relevant areas of interest by using a checklist for retirement planning with your PSPP.

First Steps

You should consult with your employer and review your Annual Pension Statement to ensure that you have been credited with all eligible pensionable service. This should be done several months in advance of your anticipated retirement date to allow for an investigation of any discrepancies.

Your application for pension should be forwarded to Provident¹⁰ by your employer at least two months before the date of retirement to facilitate a smooth transfer from the employer payroll to the pensioner payroll.

Please note that if you or your employer have an outstanding balance remaining on a purchase of service contract at the date that you leave the Plan, your benefits cannot be processed until the outstanding balance is paid in full. If you do not wish to pay the outstanding balance, the amount of service that has been credited must be re-determined based on the amounts paid. Both the pension amount and the date that you are eligible to receive a pension will be re-calculated based on the reduced amount of service. If you have questions, please contact Provident¹⁰ to discuss this matter. Failure to do so will result in a delay in the processing of your pension application.

Will my pension increase in retirement?

Pension benefits that relate to pensionable service credited in the Plan on or before December 31, 2014, receive indexing in retirement. This portion of your pension will be increased every October 1^st for retirees who have reached age 65. The annual increase is equal to 60% of the increase in general inflation in Canada (CPI), with a maximum possible annual increase of 1.2%.

Pension benefits that relate to pensionable service credited in the Plan on or after January 1, 2015, do not receive guaranteed indexing in retirement.

What documents are required?

The initial pension calculation is prepared by the employer and forwarded to Provident¹⁰ with the following:

• Pension application 
• Birth certificate
• Birth certificate of principal beneficiary* and/or child (required before survivor benefits can be paid)
• Social Insurance Number of principal beneficiary (required before survivor benefits can be paid)
• Calculation of Pension Entitlement form
• Marriage certificate
• TD (1) forms (provincial and federal)
• Direct deposit information

*Principal beneficiary includes legally married spouse or cohabiting partner, and includes a same sex partner.

Eligibility for Pension Benefits

How do I qualify for a pension at retirement? 

You must have a minimum of five years of pensionable service. This is the vesting period of the Plan. Vesting refers to the right of an employee to a lifetime pension. This does not have to be five consecutive years, but rather a total of 60 months. 

When can I retire?

The date at which you will be eligible to retire depends on many factors; your age, how much service you have credited in the Plan, and whether you were a member of the Plan on December 31, 2014, when the pension reform changes were introduced. There are also different provisions which will either allow you to retire on an unreduced basis, or to retire earlier subject to a reduction in your accrued pension.

Normal Retirement

The Plan’s normal retirement age, being the age at which all vested members are eligible to retire with an unreduced pension, is 65.

Early Unreduced Retirement

For members who joined the Plan after December 31, 2014, or for members who are not grand-parented or who did not qualify for early unreduced retirement during the transitional period (the period up to and including December 31, 2019) you will be eligible to retire early with an unreduced pension if you meet either of the following criteria:

• You have reached age 60 with a minimum of 10 years of pensionable service or,
• You have reached age 58 with a minimum of 30 years of pensionable service

Grand-parented Unreduced Retirement Criteria

The changes to the Plan’s early unreduced retirement criteria that were made as a part of pension reform were introduced on a transitional basis. During the period up to and including December 31, 2019, you were eligible to retire early with an unreduced pension if you met either of the following criteria:

• You had reached age 60 with a minimum of five years of pensionable service or,
• You had reached age 55 with a minimum of 30 years of pensionable service

Further, if you were already a member of the Plan on December 31, 2014, and qualified to retire on an unreduced basis under either of these criteria prior to December 31, 2019, you are eligible to retire on an unreduced basis at any point after that date if you decide to continue working and remain an active member of the Plan. In addition, if you had 30 years of service during this period, you were grand-parented under this provision, and are eligible to retire on an unreduced basis at age 55.

Early Reduced Retirement

There are several scenarios which allow you to retire early, with a reduction in your accrued pension. If you were enrolled in the Plan after December 31, 2014, or if you were a member of the Plan at December 31, 2014, but did not have 30 years of pensionable service by December 31, 2019, the reduced early retirement criteria are as follows:

1. If you are between the ages of 53 and 58 with a minimum of 30 years pensionable service, you can retire and receive an immediate pension that will be reduced by one-half per cent for each month you are less than age 58.
2. If you are between the ages of 58 and 60 with less than 30 years, and your age plus service totals a factor of at least 88, you can retire and receive an immediate pension that will be reduced by one-half per cent for each month you are less than age 60.

In these situations, the unreduced pension is calculated first, and the reduction is applied to the calculated pension and not to the accrual. As an example, if you are retiring having accrued 30 years of service by December 31, 2019 and are 53 years and seven months old, the reduction would be based on the number of months that you are younger than age 55, and is determined as follows:

• Months until age 55:  17 months 
• Reduction: 17 * 0.5% = 8.5%

Finally, all members are entitled to retire as early as age 55 if they are vested. If you do not satisfy any of the above criteria, your immediate pension in this case will be actuarially reduced.

Grand-parented Reduce Retirement Criteria

If you were a member of the Plan on December 31, 2014, had 30 years of pensionable service by December 31, 2019, and are between the ages of 53 and 55, you can receive an immediate pension that will be reduced by one-half percent for each month you are younger than 55. 

Calculation of Pension Benefits

How is the amount of my benefit calculated?

The formula for calculating your pension is as follows:

2% of your highest average salary (HAS), defined below, multiplied by your years and months of credited pensionable service

It is important to note that during the years from April 1, 1993, to March 31, 1996, the 2% accrual rate was lower due to a reduction in employer contribution rates. The impact of the reduction is shown in the examples of pension calculations that follow. 

As noted earlier, the Plan is integrated with the CPP. Therefore, a portion of your pension will stop on the first of the month following your 65^th birthday (the offset). The reduction is 0.6% for each year of service (to a maximum of 35 years) of the lesser of your HAS and the YMPE average for the 36 months immediately preceding the month of retirement. 

Highest Average Salary

The salary used in the pension benefit formula is based on your HAS. A different HAS is used in respect of service credited before and after December 31, 2014, as follows:

• In respect of service credited prior to January 1, 2015, the HAS is the greater of:
  • The HAS during any five 12-month periods before December 31, 2014, or,
  • The HAS during any six 12-month periods
• In respect of service credited after December 31, 2014, the HAS is the highest average salary during any six 12-month periods.

How is my highest average salary determined?

This depends on whether you were employed on a seasonal or year-round basis and whether you had service prior to January 1, 2015.

Year-round with pre-January 2015 service:

For pensionable service prior to January 1, 2015, the HAS is the greater of:

1. the average of the highest five years of salary to December 31, 2014; and
2. the average of the six continuous 12-month periods providing the highest average up to the date of retirement.

For pensionable service after December 31, 2014, the average of the six continuous 12-month periods providing the highest average up to the date of retirement serves as the HAS.

Can you provide examples of how my pension is calculated?

Examples of how your pension is calculated can be found in the Plan Booklet. You may also visit our pension calculator for an estimate of your expected pension.

Commuted Value Option

The commuted value of a benefit refers to how much a benefit is worth today. Commuted values express the lump sum value of a promised benefit. The commuted value considers the benefits, interest, and mortality. In other words, it is the amount of money that would need to be invested today to pay the earned benefit (at date of calculation) with effect from the date that the benefit would have been paid under the pension plan.

Bridge Benefit

Because the Canada Pension Plan (CPP) is integrated with the Plan and, provided that you retire before age 65, your Plan pension will include a bridge benefit. The bridge benefit is payable until the end of the month in which you reach age 65. It is also referred to as the “CPP offset”.

The bridge benefit is intended to supplement your pension income until you start receiving CPP benefits. Please note that although you may begin receiving CPP benefits as early as age 60, the bridge benefit will not be removed until the first day of the month following the month in which you reach age 65.

The bridge benefit is based on the lesser of your highest average salary (HAS) or the average of the year’s maximum pensionable earnings (YMPE) for the 36 months immediately preceding the month of your retirement. The current formula used to determine your bridge benefit is:

• 0.6% x HAS (or three-year average of YMPE) x number of years of service

Note that the maximum number of years of service used to determine your bridge benefit is 35 years.

The reduction in your pension is calculated at retirement, based on the following formula:

• 0.6% for each year of service (to a maximum of 35 years) of the lesser of your HAS and the YMPE average for the 36 months immediately preceding the month of retirement

YMPE Information

YMPE stands for the year’s maximum pensionable earnings. It is an amount defined annually by the Government of Canada and is used to calculate contributions to and benefits from the Canada Pension Plan (CPP). In 2023, the YMPE is $66,600.

Inflation Benefit

Will my pension increase in retirement?

Pension benefits that relate to pensionable service credited in the Plan on or before December 31, 2014, receive indexing in retirement. This portion of your pension will be increased every October 1^st for retirees who have reached age 65. The annual increase is equal to 60% of the increase in general inflation in Canada (CPI), with a maximum possible annual increase of 1.2%.

Pension benefits that relate to pensionable service credited in the Plan on or after January 1, 2015, do not receive guaranteed indexing in retirement.

Pension Estimator

Examples of how your pension is calculated can be found in the Plan Booklet. You may also visit our pension calculator for an estimate of your expected pension.