The Public Service Pension Plan - Overview

The public service pension plan is one of the three main public sector pension plans in the federal government (Federal Public Service, Canadian Forces, and the Royal Canadian Mounted Police). The public service pension plan was established in 1954 under the Public Service Superannuation Act. It is a contributory defined benefit plan, one where both the employer and employees make contributions. A defined benefit plan specifies the benefits payable. These benefits are directly related to the employee's salary and period of pensionable service. When a member dies, the plan also provides income for eligible survivors and beneficiaries.

Membership

Public service pension plan membership is compulsory for all eligible employees of the federal public service, including territorial governments and certain Crown corporations.

As of March 31, 2010, the plan had 561,000 members:

• 317,088 active public service employees;
• 179,670 retired employees;
• 58,575 survivors; and
• 6,062 deferred annuitants (benefit deferred to age 60).

The membership profile is as follows:

Figure 1 - Text version

Contributions

The public service pension plan benefits are financed through contributions from both the employer (Government of Canada) and from employees. A decision was made in 2006 to better align member contributions with the cost of the benefits. As a result, employee contribution rates have been increasing since that time.

In 2009-10, total employer and employee contributions reached $4.3billion:

Figure 2 - Text version

Benefit Payments

All plan members can remain confident in the sustainability of their pension plan. The public service pension plan provides benefits based on the number of years of pensionable service, to a maximum of 35 years. The benefits are determined by the following formula:

2% x number of years of pensionable service (maximum of 35 years) x average salary for 5 consecutive years of highest paid service.

Benefits are indexed annually based on increases in the Consumer Price Index.

In 2009-10, $5.0 billion in benefits were paid out and the average annual pension for a retired employee was $25,127.

Figure 3 - Text version

Like many Canadian public and private sector pension plans, the pension benefit is coordinated with the Canada or Québec Pension Plan (C/QPP), meaning the benefit is reduced automatically by a standard formula once the pensioner reaches age 65 or becomes entitled to a C/QPP disability pension. In most cases the total pension for the individual upon reaching age 65 is essentially unchanged; it is simply received from two sources (the public service pension plan and the C/QPP). Coordinating the pension plan reduces the pension contribution rates and is the best way to provide a stable combined retirement income to plan members at an affordable cost.

Investments

The Public Sector Pension Investment Board (commercially known as PSP Investments) is a Crown Corporation established by Parliament to assist the Government of Canada in financing pension benefits by investing transferred amounts in capital markets.

PSP Investments operates at arms' length from the government and from plan members. Governed by an 11-member board of directors and accountable to Parliament through the President of the Treasury Board.PSP Investments must table an annual report in Parliament.

Governance

The President of the Treasury Board is responsible for the overall management of the public service pension plan, while the Minister of Public Works and Government Services Canada is responsible for its day-to-day administration.

The Public Service Pension Advisory Committee's mandate is to review matters respecting the administration, benefit design and funding of the public service pension plan. The committee also makes recommendations to the President about those matters. The Committee is composed of employer, employee and retired member representatives. It isan important forum to seek input on plan members' views regarding their pension plan.

The Office of the Auditor General of Canada performs annual audits of the financial statements of the plan. The Office of the Chief Actuary is responsible for determining the financial position of the plan which, in turn, provides a basis for financial decisions such as determining the contribution rates.

The public service pension plan's annual report and audited financial statements, which are tabled in Parliament every year, provide the public, pension plan members and parliamentarians with an overview of the financial status of the plan.

Communicating with Plan Members

For more information, please visit Your Public Service Pension and Benefits Web Portal. This site provides active and retired federal public service pension plan members and their beneficiaries with information, tools and services related to the pension and group insurance benefits plans.