OPB News for Retired Members
Starting a new relationship in retirement
Beginning a relationship in retirement can be exciting, especially now that you have more free time to enjoy with a partner. However, there are some key considerations you should take into account.
If you were single at retirement, it's important to understand that your new spouse will not be automatically entitled to a survivor pension from the PSPP. You will need to apply to OPB for a survivor pension after your partner becomes a spouse for PSPP purposes. OPB must also approve your application before deductions to your pension would commence to provide for a new survivor pension. If your application is received after the first 90 days, a certificate of good health will be required. This process will allow OPB to recalculate your pension entitlement, and the associated costs you will be responsible for, should you wish to have a survivor pension added for your new spouse.
If you have post-retirement insured benefits coverage through Great-West Life, you may also want to apply to switch your coverage from single to family. However, if you are currently paying premiums for single coverage, applying for family coverage will increase your premium amount.
Ending a relationship and its impact on your pension
It's important to note that if you have recently ended a relationship in retirement, you cannot transfer your previous partner's survivor pension entitlement to your new spouse or make any changes to the survivor pension amount your previous partner will receive.
Before choosing how you can best support your new spouse, you should address any division of matrimonial assets that were part of a previous marriage or common-law relationship, including your pension. Start the process by notifying OPB about the change in your relationship status, and getting help to understand how it can impact your pension and the tactics that can help you minimize the impact on your pension assets. While we can help you understand how a separation or divorce impacts your pension, that doesn't replace the need to consult with a lawyer for advice on family law and how to divide your assets.
If you have divorced in retirement and your former spouse retained their surviving spousal benefits, you should consider the other assets available to you and your new spouse to help you develop an effective financial and estate plan to help ensure they're protected if you pass away first. Some options you might wish to consider include:
- using personal savings to buy an annuity that survives you or your spouse;
- buying a new term life insurance policy on your life to provide for your new spouse;
- changing your named RRSP/TFSA beneficiaries from former spouse to new spouse using the spousal roll-over provision; and
- adding your new spouse on the title of your primary home or residence.
At the end of the day, taking the time to create a strong financial and estate plan will help you lead the retirement lifestyle you want while giving you peace of mind that your spouse will be looked after if you pass away first.
An OPB Client Service Advisor is available to discuss your personal financial circumstances to help you make an informed decision about your retirement security. Our Advisory Services are available to you at no cost and are offered either in-person or over the phone. To book a meeting with one of our Advisors, log into our secure e-services on www.opb.ca.
Returning to work after retirement?
In the future you may find yourself considering returning to work after retirement for a variety of reasons. Maybe you need more retirement income to supplement your lifestyle or you miss the interactive work culture and would like to stay busy. Whatever your reason might be, keep in mind that returning or starting to work for an employer who contributes to the PSPP (the Plan) could impact your pension.
The Plan includes rules about re-employment so it's important that you're aware of how these rules could affect you.
If you return to work for an employer who doesn't contribute to the Plan, then your pension remains unaffected and you don't have to worry about it.
However, if you start working with an employer who does contribute to the Plan, then your pension will be affected. Here are some considerations to keep in mind:
- If your new position requires you to rejoin the Plan or if you rejoin by choice, your pension payments will stop and you will start making contributions again and building credit in the Plan. You'll also need to pay back any pension payments you receive for the month when you return to work. When you decide to leave your position, we'll recalculate your pension taking into account your additional credit from your re-employment.
- If you return to work with an employer who contributes to the Plan and you don't rejoin the Plan, then there are limits on the amount you can earn before there is an impact to your pension. Simply put, if your gross earnings are above a certain amount that is paid to you in any calendar quarter, then you'll need to repay any pension overpayment. To see what your re-employment earnings limit amount is, revisit your Confirmation Statement that we sent you when you first started your retirement. Keep in mind, your employer is responsible for reporting any paid earnings for each calendar quarter you remain re-employed. It's a good idea to remind your employer about this requirement, as it's your responsibility to tell them that you are receiving a pension.*
To learn more about how returning to work can impact your pension, we encourage you to book a one-on-one session with one of our Client Service Advisors, who are also Certified Financial Planners. To book a session, log into our secure e-services on www.opb.ca.
* Note: if you are hired on a fee-for-service basis, then you are responsible for contacting us and providing proof of your re-employment earnings (i.e., invoices).
How to minimize your tax bill in retirement
Making the most of your retirement income requires effective expense management and planning ahead for large, future expenses, such as vacation or long-term health care. Budgeting shouldn't be your only focus though – having a solid tax planning strategy will help ensure you're maximizing your retirement income.
This article highlights a few tax planning strategies you should consider.
Take advantage of Federal and Provincial tax credits – The Age Amount Tax Credit, and the Pension Income Amount Tax Credit, are just some examples of credits you can take advantage of to help reduce the income tax you owe. Speak with your tax advisor to ensure you are taking advantage of the right tax credits for your personal financial situation so you can maximize your after-tax income in retirement.
Split your pension income with your spouse – Take advantage of pension income splitting and assign up to half (50%) of your eligible pension income to your spouse or common-law partner. This will help reduce your overall household income. If both you and your spouse or partner have eligible pension income, you'll need to decide who will transfer and allocate part of their pension income to the other. Your accountant can help determine the split that is most advantageous for you and your partner.
Most sources of pension income can be split after age 65, such as annuity payments from your Registered Retirement Income Fund (RRIF) and converting your Registered Retirement Savings Plan (RRSP) to an annuity. However, your PSPP pension can be split before and after age 65. Speak with your tax advisor to discuss the potential income splitting impact on various personal tax credits and the potential Old Age Security (OAS) recovery tax (formerly known as 'claw back') for you and your spouse or partner. A 'clawback' is a reduction on your OAS payments if your net income for the year exceeds a certain annual threshold. To better understand how this affects you and your spouse/partner, visit the Government of Canada website to see a detailed list of eligible pension and annuity income at www.canada.ca.
Optimize your retirement savings withdrawals – Monthly payments like CPP and OAS are fixed so you only have control on their start date. Where you have more flexibility and control is with how and when you withdraw payments from your RRSPs and Tax-Free Savings Accounts (TFSA).
When you start drawing money from registered accounts, previously tax-sheltered income becomes taxable. So if you're looking to minimize your tax bill on your retirement income, start withdrawing money from your non-registered accounts or your TFSA first. This is a strategy often used to minimize tax.
You also want to look at whether your withdrawal strategy aligns with your overall financial, retirement, and estate planning goals. Therefore you may want to consider the following:
- Drawing from your TFSA first in years where your income is going to be higher since TFSA withdrawals aren't considered income. TFSA withdrawals are also helpful for years with large, lump sum expenses.
- At age 71 you have to collapse your RRSP, but you have options. You can convert to an annuity, cash it out or convert it to a RRIF. Converting to a RRIF is a tax effective strategy as it can help you minimize your taxes while allowing your funds to continue growing. While you can convert your RRSP funds before you turn 71, it means you'll have to start paying taxes on money that you could otherwise continue to save.
If you need additional income before you turn 71, it's generally a good idea to consider withdrawing from your TFSA and/or your non-registered funds first (non-registered accounts still produce taxable income), since it won't be counted as taxable income. Again, take into account your overall financial plan to ensure you're choosing the right vehicle that will help achieve your personal financial goals in retirement.
TIP: Since you must withdraw at least the minimum amount each year, you can use your spouse or partner's age for the minimum calculation, if they are younger. This will help minimize your income and allow you to extend the tax deferral on the funds in your RRIF.
The strategies we have outlined above are general guidelines to help reduce your taxes in retirement. However, to ensure you're taking advantage of the right tax-saving strategies, based on your current life stage and personal financial situation, we encourage you to speak with your tax advisor.
Planning your next trip
Once limited by time in your working years, travel options may now be endless for you. There are so many destinations in the world you can choose from, and with more freedom in retirement, you have the flexibility to travel any time of the year.
Here are a few destinations to add to your bucket list:
Visit the Rockies by train – Step aboard the Rocky Mountaineer railway, twist and turn your way through the Canadian wilderness and see the majestic Rockies up close. You can even add an Alaska cruise to your itinerary! Check out www.RockyMountaineer.com.
Southern Italy – Ever been to Sicily? Check out Palermo, the capital, visit the beautiful cathedrals, savour the local street food and enjoy the taste of local wines from Mt. Etna, Sicily's active volcano. Visit www.italia.it to learn more.
Hawaii – If you're dreaming of going somewhere warm and exotic, Hawaii is the place for you. Enjoy the calm waters of Kailua Beach on Oahu or Wailea Beach on Maui. If you're feeling adventurous, you can explore Iao Valley in Central Maui. Top your trip off by taking a sunset cruise and take in the beautiful view. Check out www.gohawaii.com to plan your trip.
European river cruise – Discover Central Europe a different way by cruising down the Danube and Rhine rivers. Take in the countryside and ancient castles while enjoying local wine and beers from Germany, the Netherlands, Austria and Hungary. Explore different destinations at www.vikingrivercruisescanada.com.
Australia – The distance may have inhibited you before, but now it doesn't have to with your flexible schedule. Visit the iconic opera house in Sydney, visit the Great Barrier Reef off the coast of Queensland or take a cruise down the Yarra River in Melbourne. Best times to visit are November to March. Visit www.australia.com.
So where will you go next? Start planning your trip today.
Sources: www.TravelandLeisure.com, www.CNBC.com
2018 contribution rate change for active, contributing members
You might have heard that the Plan Sponsor, the Government of Ontario, announced a modest contribution rate increase for active members of the Public Service Pension Plan (PSPP) starting this Spring. This increase does not impact you as a retired member.
Your benefit solidified when you retired from the Plan, which means all of your benefits remain the same and are fully protected. Your pension:
- is payable for life, there is no chance that you can outlive your pension;
- is 100% protected against inflation, helping ensure that the purchasing power of your pension remains strong throughout your retirement; and
- is backed 100% by the Government of Ontario.
At OPB, your pension is our promise.
Keep your personal contact information updated
It's a good time to review and update your contact information (address, phone, and personal email). You can do this online using OPB's secure e-services. We use your contact information to keep you updated.
If you haven't already registered for e-services, go to our website at www.opb.ca, click Login at the top-right corner of the page and follow the steps online, or call OPB's Client Care Centre at 1-800-668-6203 to register immediately over the phone.
Stay connected with e-alerts
Throughout the year we'll post important updates about the Plan and share expert articles to help you maximize the value of your pension.
To receive these updates, make sure you're registered for e-alerts.
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OPB News provides general information relevant to PSPP members. This publication is not to be relied on as legal, financial or tax advice. Please note that if there is any conflict between the contents of OPB News and the legal documents governing the PSPP, the legal documents governing the PSPP will prevail. For detailed and personalized advice about the PSPP, or retirement planning more generally, please contact one of OPB's Client Service Advisors. You can do this by logging into e-services and using the Book my 1-on-1 feature.