About your pension
As a member of the Public Service Pension Plan (the PSPP or the Plan), you should understand how pensions fit into your overall retirement plan.
If you don’t have time to read everything, here are the top five things you should know.
- Planning for your retirement – making sure you’re on track
- How changes in your life impact your pension
- Tools to help you meet your goals
- How to increase your pension credit and qualify to retire earlier
- How we can help
What is a contributory defined benefit (DB) plan?
As a DB pension plan, the PSPP provides you with a lifetime pension based on a pre-set formula using your salary history and PSPP pension credit. To help fund the pension in your working years, you and your employer both make contributions to the Plan.
Once you retire, your pension is paid to you for the rest of your life.
What are the benefits of my PSPP?
• Security – Because your pension is based on a pre-set formula, you’ll know with a fair degree of accuracy what your monthly pension will be so you can plan for your retirement.
• Peace of mind – Your pension is payable for life and it’s 100% backed by the Government of Ontario.
• Certified Financial Planners – Our CFP's can help you understand how your pension fits within your overall financial picture. They will take the time to understand your personal financial situation and goals so you can make the most informed decisions. Learn more about our CFPs.
• Investment expertise – The PSPP is managed by a team of highly skilled investment specialists who make strategic investment decisions to help generate the returns needed to fund your pension.
• Inflation protection – Your PSPP pension is indexed to inflation annually to make sure you maintain your purchasing power throughout retirement.
• Early retirement – You can retire early with an unreduced pension if your age and pension credit equals 90 points (Factor 90), or if you're at least 60 years old and have 20 years or more of pension credit (60/20). Normal retirement in the Plan is your 65th birthday.
• Survivor benefits – Making sure your loved ones are taken care of is important. Your PSPP pension includes benefits to help provide for your eligible spouse and eligible children after your death.
• Disability – The Plan provides a disability pension to eligible members. For more information, visit the Health considerations section.
What is Canada Pension Plan (CPP) integration?
CPP Integration refers to how the PSPP and CPP benefits function together during your working years, early retirement and after age 65. You are entitled to receive an unreduced pension from CPP beginning at age 65. If you choose to retire from the PSPP before age 65, your PSPP pension will include an amount called the bridge benefit. The bridge benefit ends at age 65, when you are eligible for your unreduced CPP benefit.
What is the bridge benefit?
This is a benefit from the Plan that supplements your retirement income until you reach 65, when you’re eligible to start collecting your unreduced CPP pension. At age 65, your bridge benefit ends and you start receiving your lifetime pension from the PSPP.
What is an average annual salary?
It’s the average of your annual salary for your best 60 consecutive months of membership in the Plan. Average annual salary excludes overtime pay, payments in lieu of benefits and payments that aren’t part of your regular annual salary.
What is pension credit?
This is the number of years and months that you (or your employer on your behalf) have contributed to the Plan. If you hold a regular part-time position, the pension credit you receive will be pro-rated, based on the regular full-time hours for your position. Pension credit also includes any credit you've purchased or transferred into the PSPP from another pension plan.
What is the average YMPE?
The average YMPE is the average of the year's maximum pensionable earnings (YMPE) in the year you end your membership and the two previous years. The YMPE is the earnings limit set by the federal government each year to determine maximum CPP contributions and benefits.
How is my pension calculated?
As a member of a contributory DB plan, you should understand your contribution rates and the calculations we use to determine your pension amounts.
In 2023, your annual contributions are:
7.4% of your annual salary below the year's maximum pensionable earnings (YMPE), plus 10.5% of your annual salary above the YMPE
In other words, you contribute:
- $7.40 for every $100 you earn below the YMPE
- $10.50 for every $100 you earn above the YMPE
If you retire before you reach age 65 (the normal retirement age), your pension will be calculated using the bridge benefit formula below.
Here’s how we calculate your PSPP basic pension:
2% x average annual salary x pension credit
Here’s how we calculate your bridge benefit:
|0.7% of the average YMPE or your average annual salary, whichever is less||×||Your pension credit (to a maximum of 35 years)|
Here’s how we calculate your lifetime pension:
|Your PSPP basic pension||−||Bridge benefit, which ends at age 65||=||Your annual PSPP lifetime pension|
Your lifetime pension is payable from age 65, when the bridge benefit ceases to be paid.
Contributions are deducted automatically from your pay each period.
What are the advantages of having a DB plan instead of a defined contribution (DC) plan?
While both DB and DC plans help you save for you retirement, DB plans offer some key advantages:
|Defined benefit (PSPP)||Defined contribution|
|Provides guaranteed income in retirement||Does not provide guaranteed income in retirement|
|Protects me against inflation in retirement||You have to purchase inflation protection separately|
|Allows me to accurately plan for how much income I’ll have in retirement||You can't accurately plan for how much income you'll have in retirement|
|Has investment experts managing my pension||You manage your investments on your own|
We believe that DB plans are the most efficient and effective model for delivering retirement security. DC plans force members to assume all the investment risk for their retirement funds, and they don't provide members with inflation protection. Simply put, a DC plan doesn't provide the same level of security as a DB plan.
If you'd like to learn more about unreduced retirement, read types of retirement.