Retirement Income Sources

When you retire, your retirement income generally comes from three sources:

The Old Age Security benefit is payable to Canadian citizens who meet certain residency criteria. For details, refer to the Old Age Security (OAS) Program.

The Canada Pension Plan or Quebec Pension Plan provides basic retirement income to Canadian workers.

Table of Contents

Canada Pension Plan / Quebec Pension Plan coordination

Your public service pension plan is coordinated with the Canada Pension Plan or Quebec Pension Plan (CPP or QPP). When CPP/QPP were introduced on , the federal government, like most Canadian employers offering a pension plan for their employees, decided to coordinate the new CPP/QPP with the public service pension plan so that its employees would not have to set aside a greater proportion of their salary for retirement savings.

You and your employer, like all Canadian workers and employers, must also contribute to the Canada Pension Plan (CPP), if you work outside Quebec, or the Quebec Pension Plan (QPP), if you work in Quebec.

When you are appointed to a position in the public service for an indeterminate period, or once you have worked in the public service for six consecutive months, you and your employer (the federal government) begin to make contributions to the public service pension plan.

Under the CPP/QPP, you will pay contributions on your annual earnings between a set minimum and a set maximum level.

Since the public service pension plan is coordinated with the CPP/QPP, employees contribute to the public service pension plan at two rates:

The contribution rates as of for plan members who are eligible to receive an unreduced pension at age of 60 are:

The following graph illustrates the contributions you are making to each plan in 2016.

Figure 1: Pension eligibility at age 60 - contribution rate statistics for 2016
Pension eligibility at age 60 - contribution rate statistics for 2016. Text version below:
Figure 1 - Text version
Income PSPP Contribution Rate CPP/QPP Contribution Rate
$0 9.05% 0%
$3,500 9.05% 4.95% (Minimum)
$10,000 9.05% 4.95%
$20,000 9.05% 4.95%
$30,000 9.05% 4.95%
$40,000 9.05% 4.95%
$50,000 9.05% 4.95%
$54,900 11.04% (Maximum) 0% (Maximum)
$60,000 11.04% 0%
$70,000 11.04% 0%
$80,000 11.04% 0%
$90,000 11.04% 0%
$100,000 11.04% 0%

The contribution rates as of , for plan members who are eligible to receive an unreduced pension at age of 65 are:

The following graph illustrates the contributions you are making to each plan in 2016.

Figure 2: Pension eligibility at age 65 - contribution rate statistics for 2016
Pension eligibility at age 65 - contribution rate statistics for 2016. Text version below:
Figure 2 - Text version
Income PSPP Contribution Rate CPP/QPP Contribution Rate
$0 7.86% 0%
$3,500 7.86% 4.95% (Minimum)
$10,000 7.86% 4.95%
$20,000 7.86% 4.95%
$30,000 7.86% 4.95%
$40,000 7.86% 4.95%
$50,000 7.86% 4.95%
$54,900 9.39% (Maximum) 0% (Maximum)
$60,000 9.39% 0%
$70,000 9.39% 0%
$80,000 9.39% 0%
$90,000 9.39% 0%
$100,000 9.39% 0%

This means that you contribute at a lower rate on your salary up to the maximum annual earnings on which you make contributions to the CPP/QPP and at a higher rate on your salary above that maximum.

As a result of the coordination with CPP/QPP, the public service pension plan pays a higher retirement income up to age 65, when you can begin to receive a normal (unreduced) CPP/QPP pension.

Pension formula: lifetime pension and bridge benefit

The public service pension plan provides for the payment of a lifetime pension payable until your death and a temporary bridge benefit payable until age 65.

Generally, the formula for calculating your pension is as follows:

Lifetime pension

Your annual lifetime pension payable from the public service pension plan is based on:

  • Your average salary, that is, your salary during your five consecutive years of highest paid service. It includes any salary you earned after completing 35 years of service, if that salary is the highest. Your salary is converted to equivalent full-time salary for periods during which you worked less than full time; and
  • Your years of pensionable service–that is, the complete or partial years of service credited to you at retirement–including the service buyback (whether or not it has been fully paid).

The following table illustrates how your annual lifetime pension is calculated.

Figure 3: Annual lifetime pension calculation (Full-Time)
Annual lifetime pension calculation (Full-Time). Text version below:
Figure 3 - Text version

1.375 percentFigure 3 - Note a multiplied by your average salary up to the Average Maximum Pensionable EarningsFigure 3 - Note b multiplied by your years of pensionable service (maximum 35 years)

plus

2 percent multiplied by your average salary in excess of the Average Maximum Pensionable Earnings multiplied by your years of pensionable service (maximum 35 years)

Figure 3 - Notes

Figure 3 Note a

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 1.300%
  • 1943: 1.315%
  • 1944: 1.330%
  • 1945: 1.345%
  • 1946: 1.360%
  • 1947: 1.375%

Return to Figure 3 note a referrer

Figure 3 Note b

AMPE or Average Maximum Pensionable Earnings means the yearly maximum pensionable earnings set by the CPP/QPP for the year of your retirement and the four preceding years.

Return to Figure 3 note b referrer

Figure 4: Annual lifetime pension calculation (part-time)
Annual lifetime pension calculation (part-time). Text version below:
Figure 4 - Text version

1.375 percentFigure 4 Note a multiplied by your adjusted average salary up to the Average Maximum PensionableFigure 4 Note b multiplied by your years of pensionable service (maximum 35 years)

plus

2 percent multiplied by your adjusted average salary in excess of the Average Maximum Pensionable Earnings multiplied by your years of pensionable service (maximum 35 years)

Figure 4 - Notes

Figure 4 Note a

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 1.300%
  • 1943: 1.315%
  • 1944: 1.330%
  • 1945: 1.345%
  • 1946: 1.360%
  • 1947: 1.375%

Return to Figure 4 note a referrer

Figure 4 Note b

AMPE or Average Maximum Pensionable Earnings means the yearly maximum pensionable earnings set by the CPP/QPP for the year of your retirement and the four preceding years.

Return to Figure 4 note b referrer

Bridge benefit

If you retire before age 65, you will also receive a bridge benefit. This temporary benefit helps "bridge" your pension until age 65, when CPP/QPP is expected to begin. However, the bridge benefit will stop immediately if you become entitled to CPP/QPP disability pension.

The following table illustrates how your bridge benefit is calculated.

Figure 5: Bridge benefits calculation (full-time)
Bridge benefits calculation (full-time). Text version below:
Figure 5 - Text version

0.625 percentFigure 5 - Note c multiplied by your average salary up to the Average Maximum Pensionable Earnings multiplied by your years of pensionable service (maximum 35 years)

Figure 5 - Notes

Figure 5 Note c

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 0.700%
  • 1943: 0.685%
  • 1944: 0.670%
  • 1945: 0.655%
  • 1946: 0.640%
  • 1947: 0.625%

Return to Figure 5 note c referrer

Figure 6: Bridge benefits calculation (part-time)
Bridge benefits calculation (part-time). Text version below:
Figure 6 - Text version

0.625 percentFigure 6 Note c multiplied by your adjusted average salary up to the Average Maximum Pensionable Earnings multiplied by your years of pensionable service (maximum 35 years)

Figure 6 - Notes

Figure 6 Note c

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 0.700%
  • 1943: 0.685%
  • 1944: 0.670%
  • 1945: 0.655%
  • 1946: 0.640%
  • 1947: 0.625%

Return to Figure 6 note c referrer

At age 65

At age 65, you will receive your lifetime pension. If you were in receipt of the bridge benefit, it will end on the first of the month following your 65th birthday and your CPP/QPP pension begins.

Your total pension income (your public service plan lifetime pension plus your CPP/ QPP pension) at age 65 will be approximately the same as the amount you received from the lifetime pension and bridge benefit before age 65.

The following graph illustrates retirement before age 65 and applying for a CPP/QPP pension at age 65 (age when CPP/QPP normally begins)

Figure 7: Calculation of Lifetime Pension and Bridge Benefit – Applying for a Normal CPP/QPP Pension
Calculation of Lifetime Pension and Bridge Benefit – Applying for a Normal CPP/QPP Pension. The information conveyed by the graphic is explained in the surrounding text.

Choosing an early, reduced CPP/QPP benefit

If you retire before age 65 you can also choose to begin receiving your CPP/QPP pension before age 65; however, it is a reduced pension that continues to be paid at the reduced rate after age 65. As a result, you will notice a decrease in your total pension income at age 65 because you are in receipt of an early CPP/QPP benefit.

The following table illustrates what happens if you retire before age 65 and apply for an early CPP or QPP (60 to 64).

Figure 8: Calculation of lifetime pension and bridge benefit – applying for an early CPP/QPP Pension
Calculation of lifetime pension and bridge benefit – applying for an early CPP/QPP Pension. The information conveyed by the graphic is explained in the surrounding text.

How to calculate your pension

A pension benefit calculation for someone who worked full-time

If:

  • You retire in 2016 at age 63.
  • You worked 30 years full-time.
  • Your average salary is $60,000.
  • You will reach age 65 in 2018.
  • The average maximum pensionable earnings (AMPE) in 2016 is $52,440.

Step 1: The following table illustrates how your annual lifetime pension would be calculated to be $26,167.50

Figure 9: Example of annual lifetime pension calculation (full-time)
Example of annual lifetime pension calculation (full-time). Text version below:
Figure 9 - Text version

1.375 percentFigure 9 Note a multiplied by 52,440 dollars multiplied by 30 equals 21,631.50 dollars

plus

2 percent multiplied by 7,560 dollars multiplied by 30 equals 4,536 dollars.

This is a total of 26,167.50 dollars (21,631.50 plus 4,536 equals 26,167.50 dollars).

Figure 9 - Notes

Figure 9 Note a

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 1.300%
  • 1943: 1.315%
  • 1944: 1.330%
  • 1945: 1.345%
  • 1946: 1.360%
  • 1947: 1.375%

Return to Figure 9 note a referrer

Step 2: The following table illustrates how your annual bridge benefit is calculated to be $9,832.50.

Figure 10: Example of annual bridge benefit calculation (full-time)
Example of annual bridge benefit calculation (full-time). Text version below:
Figure 10 - Text version

0.625 percentFigure 10 Note c multiplied by 52,440 dollars multiplied by 30 equals 9,832.50 dollars.

Figure 10 - Notes

Figure 10 Note c

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 0.700%
  • 1943: 0.685%
  • 1944: 0.670%
  • 1945: 0.655%
  • 1946: 0.640%
  • 1947: 0.625%

Return to Figure 10 note c referrer

Step 3: The following table illustrates the calculation of your total public service pension before and after age 65.

Figure 11: Example of total public service pension calculation (full-time)
Example of total public service pension calculation (full-time). Text version below:
Figure 11 - Text version

Your lifetime pension before age 65 of 26,167.50 dollars plus 9,832.50 dollars of bridge benefit equals a total public service pension of 36,000 dollars.

Your lifetime pension from age 65 of 26,167.50 dollars plus 0 dollar of bridge benefit equals a total public service pension of 26,167.50 dollars.

A Pension benefit calculation for someone who worked part-time

For pension benefit eligibility purposes (at retirement, termination of employment or death), a year of part-time service counts as one year of pensionable service.

For pension calculation purposes, the benefits are adjusted to reflect the assigned hours of part-time work compared with the full-time hours of the position.

Part-time example: Average salary is under the AMPE

Let's say:

  • You retire in 2016 at age 63.
  • You worked 30 years.
  • You worked 18.75 hours a week instead of 37.5 hours.
  • Your average salary is $60,000 (based on full-time salary rate).
  • Your adjusted average salary is $30,000 (based on part-time hours).
  • The average maximum pensionable earnings (AMPE) in 2016 is $52,440.
  • As $30,000 is less than the AMPE, the amount calculated at the 2% rate is $0.00.
  • You will reach age 65 in 2018.

Step 1: The following table illustrates how your adjusted average salary of $30,000 would be calculated.

Figure 12: Example of adjusted average salary calculation (part-time under AMPE)
Example of adjusted average salary calculation (part-time under AMPE). Text version below:
Figure 12 - Text version

60,000 dollars multiplied by 18.75 hours divided by 37.5 hours equals 30,000 dollars.

Step 2: The following table illustrates how your annual lifetime pension of $12,375 would be calculated.

Figure 13: Example of annual lifetime pension calculation (part-time under AMPE)
Example of annual lifetime pension calculation (part-time under AMPE). Text version below:
Figure 13 - Text version

1.375 percentFigure 13 Note a multiplied by 30,000 dollars multiplied by 30 equals 12,375 dollars

plus

2 percent multiplied by 0 dollar multiplied by 30 equals 0 dollar

This is a total of 12,375 dollars (12,375 dollars plus 0 dollar equals 12,375).

Figure 13 - Notes

Figure 13 Note a

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 1.300%
  • 1943: 1.315%
  • 1944: 1.330%
  • 1945: 1.345%
  • 1946: 1.360%
  • 1947: 1.375%

Return to Figure 13 note a referrer

Step 3: The following table illustrates how your annual bridge benefit is calculated to be $5,625.00.

Figure 14: Example of annual bridge benefit calculation (part-time under AMPE)
Example of annual bridge benefit calculation (part-time under AMPE). Text version below:
Figure 14 - Text version

0.625 percentFigure 14 Note c multiplied by 30,000 dollars multiplied by 30 multiplied equals 5,625 dollars.

Figure 14 - Notes

Figure 14 Note c

This percentage applies if you will reach age 65 in 2012 or later, i.e. you were born in 1947 or later. The percentages if you were born before 1947 are indicated below:

  • Before 1943: 0.700%
  • 1943: 0.685%
  • 1944: 0.670%
  • 1945: 0.655%
  • 1946: 0.640%
  • 1947: 0.625%

Return to Figure 14 note c referrer

Step 4: The following table illustrates the calculation of your total public service pension before and after age 65.

Figure 15: Example of total public service pension calculation (part-time under AMPE)
Example of total public service pension calculation (part-time under AMPE). Text version below:
Figure 15 - Text version

Your lifetime pension before age 65 of 12,375 dollars plus 5,625 dollars of bridge benefit equals a total public service pension of 18,000 dollars.

Your lifetime pension from age 65 of 12,375 dollars plus 0 dollars of bridge benefit equals a total public service pension of 12,375 dollars.

Note:

Indexation amounts are not included in these examples. Since the indexation payable is directly related to the total amount of pension you receive, the indexation amount payable will be lower when the bridge benefit ends.

OAS, CPP or QPP payments are not included in these examples.

Protection from inflation

Why protection from inflation is important

It is difficult to evaluate future pricing of goods and services. In other words, it is not easy to anticipate inflation through your retirement years and to plan your retirement savings accordingly.

An item that costs $1 today may cost more in a few years. If your pension is not indexed, you will have the same dollar amount of pension income in 10, 15 or 20 years. Since the cost of living will undoubtedly be higher, your purchasing power will diminish.

Pension indexing is an important feature of the public service pension plan that helps protect your purchasing power.

How the plan counteracts inflation

To counteract the effect of inflation on your pension, the public service pension plan provides for full indexing of pensions in payment and deferred pensions.

Once you have retired, your pension (immediate annuities and annual allowances) as well as survivor benefits and child allowances are increased on January 1 of each year to take into account the cost of living, based on increases in the Consumer Price Index (CPI).

For employees of Correctional Service Canada whose pension benefits are based on operational service, benefits are indexed when the combination of the plan member's age and number of years of service equals 85. Indexing will not be received before age 55 but will not be delayed past age 60. Additional information on special benefits related to operational service is available in Operational Service Provisions.

How the increase is determined

The increase is determined by taking the average Consumer Price Index (CPI) for goods and services of a 12-month period ending in September and comparing it to the previous 12-month average CPI.

In any given year, if there is no change in the CPI, or if it drops, your pension will not be adjusted for that year.

Note: If you become re-employed in the public service after retirement and begin contributing to the pension plan again, the indexing increase will be based on your last retirement date.

Effects of re-employment on indexing benefits

If you become re-employed in the public service and begin to make contributions to the public service pension plan the payment of your benefit, including indexing, will cease. When you cease to be employed again, your indexing benefit will be based on the amount of your basic pension at that time. Your retirement date for determining the annual percentage increase will be the most recent retirement date.

The new combination of benefits - that is, your new annuity plus the increase based on the later year of retirement - could be lower than the previous total entitlement. If you are thinking of taking a job in a contributory position, carefully consider if it would affect your total pension benefits.

If you are re-employed past age 71, you cannot contribute to the public service pension plan. However, if you are in a position that would normally require you to contribute to the pension plan, your monthly pension (including indexing) will cease to be paid until you stop working, even if you are past age 71.

Example of the effect of indexing on your pension

The following chart shows how indexing can affect your pension. You will notice a pension decrease at age 65. That's when the bridge benefit stops. At age 65, you are entitled to apply for a pension under the Canada Pension Plan or Quebec Pension Plan.

Figure 16: Effects of hypothetical inflation rates on your public service pension
Effects of hypothetical inflation rates on your public service pension. Text version below:
Figure 16 - Text version
Age No Indexing 1.5% Indexing 1% Indexing 2% Indexing
60 $24,000.00 $24,000.00 $24,000.00 $24,000.00
61 $24,000.00 $24,360.00 $24,240.00 $24,480.00
62 $24,000.00 $24,725.40 $24,482.40 $24,969.60
63 $24,000.00 $25,096.28 $24,727.22 $25,468.99
64 $24,000.00 $25,472.72 $24,974.49 $25,978.37
65 $16,600.00 $17,618.64 $17,274.03 $17,968.41
66 $16,600.00 $17,882.92 $17,446.77 $18,327.78
67 $16,600.00 $18,151.16 $17,621.24 $18,694.34
68 $16,600.00 $18,423.43 $17,797.45 $19,068.23
69 $16,600.00 $18,699.78 $17,975.42 $19,449.59
70 $16,600.00 $18,980.28 $18,155.17 $19,838.58
71 $16,600.00 $19,264.99 $18,336.72 $20,235.35
72 $16,600.00 $19,553.96 $18,520.09 $20,640.06
73 $16,600.00 $19,847.27 $18,705.29 $21,052.86
74 $16,600.00 $20,144.98 $18,892.34 $21,473.92
75 $16,600.00 $20,447.15 $19,081.26 $21,903.40
76 $16,600.00 $20,753.86 $19,272.07 $22,341.47
77 $16,600.00 $21,065.17 $19,464.79 $22,788.30
78 $16,600.00 $21,381.15 $19,659.44 $23,244.07
79 $16,600.00 $21,701.87 $19,856.03 $23,708.95
80 $16,600.00 $22,027.40 $20,054.59 $24,183.13
81 $16,600.00 $22,357.81 $20,255.14 $24,666.79
82 $16,600.00 $22,693.18 $20,457.70 $25,160.12
83 $16,600.00 $23,033.58 $20,662.28 $25,663.32
84 $16,600.00 $23,379.08 $20,868.90 $26,176.59
85 $16,600.00 $23,729.77 $21,077.60 $26,700.12

For example, let's say you retire at age 65 with an annual pension of $16,600. Ten years later, you would receive the following amount:

  • If the inflation rate is 1 percent (this means that your pension would be increased by 1 percent): $19,272.
  • If the inflation rate is 2 percent (this means that your pension would be increased by 2 percent): $22,341.

Separation or divorce

If your marriage or conjugal relationship ends, the pension benefits you have acquired during the course of that marriage or during the period of cohabitation in a conjugal relationship may be divided according to the terms of the Pension Benefits Division Act (PBDA).

If you are divorced, your former spouse is not entitled to a survivor benefit. If you are separated from your legal spouse, but not divorced, your spouse is entitled to a survivor benefits.

Who is eligible for pension benefits division

If you were married and have separated or divorced, or if you have lived in a conjugal relationship for at least one year and have separated, you are eligible for the division of your pension benefits.

Either you, your former spouse or a third party can apply for a division by making a formal application, which must be accompanied by a court order or agreement between the parties providing for the division of benefits. If the application is based on an agreement, you must have been separated for at least one year.

What happens if the division is approved

If the division is approved, the share of the benefit value being divided will be transferred either to a locked-in registered retirement savings vehicle chosen by the party receiving the value, or to a life insurance company to purchase a life annuity.

This amount can never exceed 50 percent of the value of the benefits being divided.

Your pension benefits will be reduced to reflect the division.

Objecting to the division

You will be notified of any application made to divide your benefits, after which you can file an objection with the Minister of Public Works and Government Services Canada. You have 90 days after the notice of application is sent out to file your objection.

Valid grounds for objection are:

  • The court order or agreement between the parties has been changed or is no longer valid;
  • The terms of the court order or agreement between the parties have been satisfied, or are being satisfied, by some other means; or
  • The court order has been appealed or the terms of the agreement between the parties are being challenged in court.

Additionally, the Minister may refuse to approve a division if he or she is satisfied, based on evidence submitted, that it would not be just to do so.

For more information about the division of pension benefits, contact the Government of Canada Pension Centre.

Date modified: