Buying back past pension service
Whether you’ve just joined or you’ve been contributing to the Plan for a while, it’s a good idea to see if you have any eligible service that you can purchase. This can help you maximize your pension amount and possibly retire sooner.
Generally speaking, the sooner you apply to buy back credit, the lower the cost, so we recommend exploring this now. However, there are some strict timelines and tax implications you should consider.
Why should I consider buying back credit?
Here are the top advantages to buying back pension credit:
- You will earn a larger pension
- You may qualify for an unreduced pension sooner
- You may qualify for insured benefits in retirement
Note: There are different eligibility criteria for certain groups within the PSPP, such as Case Management Masters, Justices of the Peace, First Nations Constables, and OPP officers, to name a few. For more information on insured benefits eligibility, read insured benefits after retirement.
You should apply to buy back credit as soon as possible, for the following reasons:
- The cost of buying back credit increases over time, often substantially
- Some pension plans have time restrictions on taking out pension benefits for transfer between plans
To see some examples of how buying back credit works, click on one of the options below.
Example: Buying back pension credit for past OPS employment without contributions
Vanessa joined the PSPP at age 33, on April 25, 2017. At the time, she had four years and zero months of past OPS service without contributions.
If Vanessa applied to buy back the pension credit within 24 months of joining the PSPP in March 2009, when her annual salary rate was $68,500, the single contribution cost would be approximately $17,600.
If Vanessa applied to buy back the pension credit after 24 months of joining the PSPP, the cost would be actuarial. So, if Vanessa applied in April 2019, when her annual salary rate was $68,500, the cost would be approximately $54,500 for the three years and eight months of pension credit.
Unreduced pension without buyback at April 25, 2035 (60/20) approximately:
$38,400 at age 60
$27,100 at age 65 (adjusted for CPP integration)
Unreduced pension with buyback at April 25, 2034 (Factor 90) approximately:
$42,500 at age 59
$30,000 at age 65 (adjusted for CPP integration)
Vanessa's purchase gives her the option to retire approximately one year earlier with a pension that is about $4,100 higher annually.
Example: Buying back pension credit for a leave of absence without pay
Frank joined the PSPP on June 1, 1990, at age 29. He took a one-year leave of absence without pay due to illness from July 1, 2014, to June 30, 2015.
If Frank applied to purchase the leave within 24 months of returning from his leave in July 2015, when his annual salary rate was $75,000, the single contribution cost would be approximately $5,500.
If Frank applied to purchase the leave after 24 months of returning from his leave, the cost would be actuarial. So, if Frank applied in April 2019, when his annual salary rate is $75,000, the cost would be approximately $47,400 for the one-year leave.
Unreduced pension without buyback at May 31, 2021 (60/20) approximately:
$45,000 at age 60
$32,900 at age 65 (adjusted for CPP integration)
Unreduced pension with buyback at November 30, 2020 (Factor 90) approximately:
$45,750 at age 59.5
$33,500 at age 65 (adjusted for CPP integration)
Frank's purchase gives him the option to retire approximately six months earlier under Factor 90 with a pension that is approximately $750 higher annually.
Do I have eligible service?
If you have any periods where you worked for the Ontario government and didn’t contribute to the Plan, or worked for another Canadian employer where you contributed to a registered pension plan, you may be able to purchase that service.
How do I apply?
In general, if you are buying back any eligible period of prior non-contributory OPS service, you must submit an OPB1043 – Application to Purchase Pension Credit (PDF) to the employer. If you are buying back any other type of service, submit the OPB1043 to us.
Click on the eligible period of employment below that you are interested in buying back credit. The link will provide you information about eligibility, time limits, payment options, costs and more.
- A period of employment in the Ontario Public Service when you did not contribute to either the PSPP or OPSEU Pension Plan
- An unpaid leave of absence for 31 days or more where you did not contribute while on leave
- A period of employment in the Ontario government before 1992 when you contributed to either the PSPP or OPSEU Pension Plan
- A period of employment in the Ontario Public Service since 1992 when you contributed to either the PSPP or OPSEU Pension Plan
- A period of employment with a non-Ontario Public Service employer before 1992 when you belonged to another registered pension plan in Canada
- A period of employment with a non-Ontario Public Service employer since 1992 when you belonged to another registered pension plan in Canada
- A shortfall (top up) not previously purchased when you transferred pension credit into the PSPP from another registered pension plan through a transfer agreement
- A period lost because of a legal strike or lockout
- A period of temporary layoff because of a legal strike or lockout
When should I apply?
You should apply to buy back credit as soon as possible, because the cost of buying back credit will most likely increase substantially over time. Some pension plans have time restrictions on taking out pension benefits for transfer between plans.
Although you can apply to purchase credit at any time, you'll receive a far more preferential valuation by applying within the 24-month costing window. The start date depends on your circumstances and which type of credit you are buying, but is usually the latest of:
- The date you became a member of the PSPP (or in some cases, the OPSEU Pension Plan)
- The last day of a leave of absence without pay with a PSPP employer
- The last day of a legal strike, lockout or temporary layoff because of a legal strike or lockout ended
- The date when you received notification of a shortfall that resulted from transferring pension credit into the PSPP
After your 24-month costing window has ended, you can still buy back the pension credit as long as you are a member of the PSPP, but the cost may be much higher. Note that any changes to your salary, even within the 24-month window, will impact your buyback quote, so we recommend you apply as soon as possible.
What will it cost to buy back pension credit?
The cost of buying additional pension credit will depend on a few factors including:
- When you apply for your purchase, particularly whether you apply within your 24-month costing window or outside your 24-month costing window
- The type of eligible period you are applying to buy back
- The length of that period
The cost of your buyback will be calculated based on your salary at the time we receive your application. This can affect the overall cost of the buyback.
Are there any tax considerations?
Some buybacks are tax deductible and others are not. Check out the Limits and Taxes page to learn more about how much pension credit you can buy for employment after 1989, how much pension credit you can build in the PSPP each year, and whether your payment for pension credit will be tax deductible.
We have tools to help you
If you want to maximize your pension credit, there are some helpful resources available to help you make the most informed decision.
To buy back pension credit for non-OPS service and other service where your 24-month costing window has closed, use the Buyback Calculator available through your e-services account.
You can create your own personal estimate to buy back credit or forecast what your PSPP pension might be at retirement. Using the calculator, you can see how buying back pension credit will impact your pension, as well as determining whether it will help you qualify to retire earlier than age 65 with an unreduced pension. The calculator can also help you see the pension impact (in dollars) of buying back pension credit. To start using the calculator, click Login at the top right corner of this page.
If you have any questions about buying back or transferring pension credit, contact us at 416-364-5035 or toll-free at 1-800-668-6203, to discuss what options are available to you.
If you have a buyback quote and you’re not sure what to do, contact a Client Service Advisor. To book a 1-on-1 session, log into your e-services account and click Book my 1-on-1.
To learn more about buying back credit, read Understanding your pension credit (PDF).
For more information on how to qualify for an unreduced pension sooner, check out how your pension is calculated.
To learn more details about tax deductibility, speak with your accountant or personal tax advisor.
Still have questions? Give us a call at 416-364-5035 or toll free at 1-800-668-6203.