Weighing Your Options

Annual Allowance

When to make your option: You can make your option upon leaving or after you have left the Public Service with a deferred annuity. The annual allowance is a pension that is permanently reduced to take into account the early payment of your pension (see Annual Allowance in "Formulas and Methods "). An annual allowance becomes payable at any time from age 50 to 60. Under normal circumstances, this option cannot be reversed.

What about inflation: An annual allowance is fully indexed as of the most recent date you leave the Public Service in order to maintain your purchasing power throughout your retirement. Your total pension amount is indexed according to the consumer price index (CPI). Refer to indexing for additional information.

Protection in case of disability: If you opt for an annual allowance and become disabled as per the definition described under the Public Service Superannuation Act (PSSA) after your departure from the Public Service, then it is important that you inform the Superannuation Directorate. In that circumstance, your annual allowance could be suspended and you could become eligible for an immediate annuity on grounds of disability. This disability benefit is indexed annually and reduced at age 65 or if you begin collecting Canada Pension Plan(CPP) / Quebec Pension Plan (QPP) disability benefits.

Reduction at age 65: Your annual allowance will be reduced at age 65 as a result of the integration with the CPP/QPP (or as soon as you receive a disability pension from the CPP/QPP). The CPP/QPP reduction for an annual allowance will be based on the same formula as if you had opted for a deferred annuity. See the CPP/QPP integration calculation in "Formulas and Methods". Refer to co-ordination of the Public Service Pension Plan with the Canada Pension Plan or Quebec Pension Plan for additional information.

What happens to your insurance plans: If you opt for an annual allowance, then you are still considered a PSPP member. As such, you or your eligible survivors may ask to become a member of the Pensioners’ Dental Services Plan (PDSP) and the Public Service Health Care Plan (PSHCP). If you begin receiving an annual allowance within 30 days of your departure from the Public Service, then your PSHCP automatically continues, but at a different contribution rate than for Public Service employees. Certain conditions apply. Learn more on My Benefits.

Protection in the event of death: Your plan offers you a form of decreasing term life insurance and several types of benefits in the event of your death. Remember that if you are receiving an annual allowance (reduced pension) when you die, the survivors benefits will be calculated based on your unreduced pension. You can find out more about this topic on Protecting Your Survivors.

Protecting your survivor: If you opt for an annual allowance, then your eligible survivor will receive a benefit in the event of your death. A survivors’ benefit normally comes to half (50%) of a pension (before reductions). See the Survivor Benefit formula in "Formulas and Methods ". This survivor's benefit is fully indexed on an annual basis upon your death and for the rest of your survivor’s life.

Protection for your children: If you opt for an annual allowance, then your eligible children will receive a child’s allowance in the event of your death. A child’s allowance is 20% of the survivor’s benefit for each of your children, up to a maximum of four children. If there is no survivor or if the survivor does not receive any survivor’s benefits, then the child’s allowance is 40% of the survivor’s benefit for each child, up to a maximum of four children (see the Child Allowance calculation in "Formulas and Methods"). A child’s allowance is fully indexed on an annual basis until your child, according to the definition of child under the Public Service Superannuation Act (PSSA), reaches 18 years of age, or later if he or she is a full time student and is deemed to be a dependant "child” under the PSSA and its regulations.

Supplementary death benefits: The Supplementary Death Benefit (SDB) Plan is a form of decreasing term life insurance. The death benefit under this plan is paid to your designated beneficiary. The benefit amount is twice your annual salary, rounded up to the nearest $1,000. This amount decreases by 10% annually, starting at age 66. You may also be entitled to a paid-up benefit of $10,000, beginning at age 65 and for the remainder of your life.

Your membership in the SDB Plan is automatically extended if you receive your annual allowance within 30 days of your departure. Therefore, you remain entitled to the $10,000 paid-up benefit. If you opt for an annual allowance more then 30 days after you leave the Public Service, then you may still apply to participate in the SDB plan, but time limits, conditions and additional costs apply. To learn more, visit Protecting Your Survivors and Death and Bereavement.

What happens if you are re-employed: If you again become employed in the Public Service and a PSPP contributor, then your annual allowance will be suspended. Your pension may be recalculated based on the entitlements accrued during your period of re-employment and the past annual allowance you received. The pension you will be entitled to will be indexed as of your new departure date.
For more information, consult re-employment in the Public Service.

Pensions