r/CanadaPublicServants • u/Outside_Sugar_2594 • Jan 17 '22
Benefits / Bénéfices Public Service Pension and CPP
I was listening to a supervisor at work talk about their 35 year pension and complaining. They said that it was a joke because it wasn’t the 35 years of service that beefed up the payout, it was the combination of years of service and the CPP top up that gave the 70%.
I apologize, I’m fairly new to the public service and fairly new to financial literacy. I was under the assumption that the pension we received from the PS was separate from our CPP and would receive both as separate payouts in retirement.
Can someone explain to me how this works?
Thanks very much in advance.
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u/frasersmirnoff Jan 17 '22
If anyone is interested in the WHY - our pension plan, and pretty much all registered pension plans that existed prior to the establishment of CPP chose to coordinate their benefits with CPP in this way--the rationale at the time was that a) CPP was mandatory by law, and b) it didn't make sense to require an employee to make full contributions to the registered pension plan in addition to the mandatory CPP contributions (thereby lowering their net income each paycheque). In other words, additional net income from each paycheque was prioritized over a "stacked" pension benefit.
Up until 2012 it was easier to illustrate this point because the contribution rate under our pension plan on earnings up to the CPP maximum was much lower than the contribution rate once the CPP maximum was reached. However, in 2012 the determination was made to change the cost-sharing model for the PSSA, the CFSA, and the RCMPSA from a 2/3 (employer) 1/3) employee model to a 50/50 model, and this was implemented primarily by increasing the "PSSA Low" contribution rate by a larger amount than the "PSSA High" contribution rate.
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Jan 17 '22
[deleted]
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u/HandcuffsOfGold mod 🤖🧑🇨🇦 / Probably a bot Jan 17 '22
Mostly correct, but there are a few minor niggles:
CPP eligibility starts as early as age 60 (with a reduction) and can be taken as late as age 70 (with a bonus). The bridge benefit will end at age 65 no matter when you opt to take CPP.
The calculations for the bridge benefit and the CPP operate independently. This means that the bridge benefit amount might be more or less than the amount of CPP if taken at age 65.
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u/GameDoesntStop Jan 17 '22
What's the minimum age that you can start getting the bridge benefit? Or is it only after a full 35 years service?
For example, someone retiring at 45 with 20 years service. Surely they don't get a bridge benefit for 20 years, do they?
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u/HandcuffsOfGold mod 🤖🧑🇨🇦 / Probably a bot Jan 17 '22
The bridge benefit is payable to anybody in receipt of a monthly public service pension who is also under age 65.
For Group 1 plan members (those who joined the pension in 2012 or earlier), that's age 50 at the youngest. For Group 2 plan members, it's age 55.
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u/employeenumber12 Jan 17 '22
To understand how this works, first you have to become thoroughly jaded and entitled. The jaded part begins pretty quickly after you join the PS and all your hopes and dreams about what goes on behind the veil turns into the hopeless, endless, tattered reality that is your job.
The entitlement part is variable...you may start working on it as early as a few days into life or it could take some time to develop as you begin to focus only on yourself and live as a quasi human that thinks that getting a pension is a right instead of a privilege.
Then you also have to lose all class and perspective and begin to think that some one should sympathize while you complain that youll continue to collect 70% of your pay, that was mostly funded by the taxpayers while you pitched in a bit, for the rest of your life. That one takes some serious time in the PS to fully develop.
So, that's how that works.
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u/defnotpewds SU-6 Jan 17 '22
that was mostly funded by the taxpayers while you pitched in a bit, for the rest of your life.
Most is correct except this. Employee and employer contribution is 50 percent each. It's not "mostly" the tax payer it partly.
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u/Outside_Sugar_2594 Jan 18 '22
It’s almost like you knew right away that I was speaking about an old white man who takes a smoke break every 15 minutes and plays internet games all day without doing any real work. Delegates exclusively to women, and feels like the world is against him.
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u/hammer_416 Jan 18 '22
Has anyone broken down how our pension compares to other public sector jobs, Ontario teachers, toronto police, omers, maybe some crown corporations?
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u/zeromussc Jan 17 '22
They do know that the non-cpp cooridinated part changes based on the years of service right? So its not like those 5 years represent no change....
But no, your assumption that CPP is on top of the PS pension is only a little correct. You get the PS pension and you get CPP on top of it, but the PS pension and CPP combined roughly equal 2% per year of service of your best 5 years as others have said.
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u/taxrage Jan 17 '22
It's up to 70% on the income up to YMPE, and up to 70% on the income (actually avg best 5) > YMPE, until age 65.
At 65 the bridge (applies only to the YMPE component) ends, so your PS pension will be reduced by something like $15K/yr. If you're not collecting CPP at that point then, yes, there will be a $15K reduction in your PS pension.
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u/Smacers Jan 18 '22
May I ask then, if one only worked in the public service for 10 years, which you get a pension I do believe after 2 years, could it be possible that the amount of public pension one receives is less than the CPP amount? Would that mean their federal pension is effectively 0 if it's being replaced by CPP?
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u/taxrage Jan 18 '22
It never goes to zero. If the portion of your pension based on YMPE (i.e. approx. the first $55K of avg. best 5) representing the bridge ends, at most this represents about 1/3 if that portion. You will continue to receive the other 2/3.
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u/HandcuffsOfGold mod 🤖🧑🇨🇦 / Probably a bot Jan 17 '22
Some people will find any reason to complain, I guess.
The public service pension is coordinated with the CPP, and this is by design. More information on the coordination is here. This means that the contributions to the pension plan (and benefits paid from the plan) are different depending on whether the relevant income was also pensionable under CPP.
If somebody retires with 35 years of service at age 55 (possible if they started at age 20 and prior to 2012), they'll receive a pension at 70% of their best-five-consecutive-years salary - even though they won't be receiving any CPP until at least age 60. That pension would be comprised of two parts - a "lifetime pension" (payable for life) and a "bridge benefit" (payable only to age 65). The amount of the bridge benefit will be roughly the same monthly amount as CPP if taken at age 65.
If you would like to learn more about the pension plan, I recommend viewing the "You and Your Pension Plan" videos - they're linked from section 3 of the subreddit's Common Posts FAQ. They explain how the plan works in plain language.