Leaving the PSPP before retirement
We understand you may not spend your entire career working for a PSPP employer, as you’re likely to change jobs and careers a few times in your life.
The good news is that even if you leave your job, you won’t lose the credit you’ve earned in the Plan. That remains protected and you’ll be able to choose what to do with the benefit you’ve earned. The options available to you will depend on a number of factors including your age and the value of your pension benefits.
If you leave the Plan, you still have the option of keeping your pension benefit in the PSPP. We call this a deferred pension, which means you’re no longer actively contributing to the Plan. You can collect your pension at 65, your normal retirement date.
There are a number of benefits that come with taking a deferred pension:
- It's payable for your lifetime with no risk of outliving your pension
- It includes valuable survivor benefits
- It’s adjusted for inflation – You receive annual cost-of-living adjustments before and after you start collecting the pension
- You can rejoin the PSPP in the future and your membership will automatically be reinstated
Do I have any other options besides taking a deferred pension?
You have a couple of other options including:
Transferring your pension credit out of the Plan through a reciprocal transfer agreement (RTA)
- The PSPP participates in transfer agreements with other private and public sector pension plans. These agreements allow you to move your pension credit from one participating plan to another. If you’re considering this option, please contact us before you complete your Termination Elections Package, which we will mail to you once your employer has updated us about your status.
- If your new employer offers a pension plan, you should find out if you have this option. Consolidating your credit can increase the value of your total pension when you retire.
- There are strict timelines you should be aware of. Please refer to Transferring pension credit out of the PSPP.
Taking the commuted value (taking a lump sum payment for members under age 55)
Notice: As the commuted value (CV) of your pension is determined using the interest rates and assumptions in effect at the time it was calculated (which is assumed to be the time of termination for the purposes of the calculation). Therefore, your CV estimate may decrease or increase compared to an estimate provided at a different time if assumptions change or interest rates rise or fall.
- The commuted value is a dollar value that is placed on your pension. It’s equal to the amount of money the Plan would have to set aside today to pay your pension at retirement.
- By transferring the commuted value of your pension entitlement, you will be responsible for investing your retirement funds to ensure you have enough money in retirement. You will also give up survivor benefits that your eligible survivors would receive if you elected a deferred pension, and you will give up future cost-of-living adjustments to your pension that you would have received with a deferred pension. Lastly, you will have to pay taxes on the amount of the commuted value that is above the maximum transfer limits found in the federal Income Tax Act.
- Check out the helpful links section at the bottom of the page for more information. Call us if you are considering this option so we can help you determine what is best for you.
You will receive a Termination Information and Elections Package from us in the mail once we have received notification from your employer, as well as your final pension contributions (this is 30 days from your termination date). This package will outline the decision you need to make, what options are available to you and next steps you need to take.
What if I become a member of the Ontario Public Service Employee Union (OPSEU)?
If you move from a job in which you are eligible for PSPP membership to a job that is covered by the Ontario Public Service Employee Union (OPSEU) Pension Plan without a break in your employment, the pension credit you have built in the PSPP will be automatically moved to the OPSEU Pension Plan.
What happens if I’m involuntarily terminated?
If you’re in a situation where you’ve been involuntarily terminated, you may be eligible for what we call grow-in benefits. With grown-in benefits, you can begin to receive an unreduced pension at your earliest unreduced retirement date (EURD) rather than having to wait until age 65.
You are eligible for grow-in if:
- You meet the 55-point test
- You have an earliest unreduced retirement date
- You’re involuntarily terminated
Please note: You are not eligible for grow-in benefits where you terminate your employment voluntarily (unless your employer has already given you notice of termination). This means that if you participate in the Voluntary Exit Program, the Transition Exit Initiative or a similar program under which employees terminate their employment voluntarily, or take the place of an employee who has received notice of lay-off, in return for severance benefits, you will not be eligible for grow-in benefits.
What is the 55-point test?
To meet the 55-point test, you must meet one of the following requirements:
- Your age plus pension credit equals at least 55 points
- Your age plus continuous employment/PSPP membership equals at least 55 points.
What happens if I start collecting my deferred pension before age 65?
You can retire as early as age 55, but your pension will be reduced depending on your age. Your pension will be reduced by 5% per year for each year you’re under 65 to reflect the fact that you're starting it early and will be collecting it longer.
At age 65, your early retirement bridge benefit will end and your pension will be integrated with CPP. To learn more about CPP integration, read about how your pension is calculated.
Takeaways and advice
Just because you leave your employer doesn’t mean you have to leave the Plan – your pension credit remains protected. Your options are as varied as your life choices, but there are certain options that may be better for you based on your personal circumstance. To help you plan ahead for your financial future, you need to give some thought to your options.
We understand that this is a complex topic, with many different factors to consider, that will impact your financial future. That's why we offer our members one-on-one advisory services with our Client Service Advisors, who are Certified Financial Planners®. They can help you explore which option is best for you and the potential impact to your pension. Log in to your e-services account and click Book my 1-on-1 to schedule an appointment.
If you have any other questions about the details above, please call us at 416-364-5035 or toll-free at 1-800-668-6203.
If you’re interested in learning about whether you’re eligible for grow-in, and to read more about other options that may be available to you when leaving the Plan, read Transferring pension credit out of the PSPP (PDF) and Planning today for tomorrow (PDF).