If you are retired, these changes do not affect your pension; the changes may benefit you because they strengthen cost-of-living protection.
If you are working with a plan employer...
These changes do not affect your benefits earned up to December 31, 2015.
These changes affect your benefits earned starting January 1, 2016.
The three changes affect the lifetime pension formula, the early retirement reduction, and contributions to cost-of-living adjustment account.
The impact of the changes depends on variables such as your age at retirement, highest average salary (HAS) (see Glossary) and years of pensionable service (see Glossary) before and after January 1, 2016.
All members, once retired, benefit from the increased funding to strengthen cost-of-living protection.
Starting January 1, 2016, your lifetime pension is calculated using two pension formulas.
For service earned after January 1, 2016, your lifetime pension is calculated at two per cent per year.
For service up to December 31, 2015, your lifetime pension is calculated at:
1.7 per cent on earnings up to the year’s maximum pensionable earnings (YMPE) (see Glossary) times years of pensionable service (see Glossary)
2 per cent on earnings above the YMPE with
a temporary 0.3 per cent bridge benefit calculated on earnings up to the YMPE times years of pensionable service payable until age 65 or your death, whichever is first.
The formula for service earned up to December 31, 2015:
(1.7% x HAS [see Glossary] up to the YMPE + 2% x HAS in excess of the YMPE) x pensionable service = lifetime pension
The bridge benefit is added to the plan member’s lifetime pension. It is payable to age 65 or death, whichever is first.
The bridge benefit is calculated as:
0.3% x HAS up to the YMPE x pensionable service = bridge benefit
Note: Contributory service earned over your career with plan employers may be used in the calculation of early retirement reductions for service earned before January 1, 2016.
The formula for service earned as of January 1, 2016:
2.0% x HAS x pensionable service = lifetime pension
Note: Your lifetime pension may be reduced if you retire before age 65.
Note: There is no bridge benefit in this formula.
If you decide to retire before being eligible for an unreduced pension, your pension (including your bridge benefit, if applicable) will be reduced.
What if you have 35 years of contributory service in the College Pension Plan?
If you have 35 years of contributory service (see Glossary) with the plan, you will be eligible for an unreduced pension when you retire.
What if you do not have 35 years of contributory service in the College Pension Plan?
Your reduction for the service you’ve earned up to December 31, 2015, will be either three or five per cent per year, depending on the age you end your employment, the number of years of your contributory service and when you earned this service. Your bridge benefit will be proportionately reduced. Your reduction for service earned on or after January 1, 2016, will be three per cent per year below 65 years of age.
Contributions to cost-of-living adjustment account
Starting April 1, 2014 the plan is putting in place a new mechanism to strengthen the long-term health of the account for cost-of-living adjustments (see Glossary).
For every annual pay increase of one per cent or larger, one twentieth (five per cent) of that increase will support cost-of-living protection as employer contributions, which will be matched by the employee.
Upon instruction from the plan partners (see Glossary), when the annual pay increases negotiated between the unions and the Post-Secondary Employers’ Association is one per cent or larger, employers and employees will each contribute five per cent of that increase to the account for cost-of-living adjustments.
When the plan partners instruct the board to increase the contribution rate, it will apply to all plan members, union and non-union.
For every one dollar increase in pay, five cents will be an employer contribution to the cost-of-living adjustment account. Members will also contribute five cents to the same account.
You will be notified of any contribution rate changes before they are implemented.
The bridge benefit (see Glossary) you earned on service up to December 31, 2015, has not been removed. As of January 1, 2016, pensionable service you earn no longer adds to your bridge benefit; there is no need for a bridge since the plan provides a full two per cent pension benefit.
These changes effectively convert the bridge benefit into a lifetime pension benefit, meaning members receive a higher lifetime pension since there is no bridge benefit that will stop at age 65.
The bridge benefit is a temporary monthly payment that was designed to bring a member up to a full two per cent pension until they could draw their Canada pension at age 65.
2. What will my pension be if I retire 5 years, 10 years or more after January 1, 2016?
Each member’s situation is unique. The impact of the changes will depend on a number of variables such as your age at retirement, your highest average salary (see Glossary) and your years of pensionable service before and after January 1, 2016.
3. Will contribution rate increases be eliminated in the future as a result of these changes?
No. The Joint Trust Agreement, one of the plan’s key governance documents, requires the College Pension Board of Trustees increase contribution rates if the plan has an unfunded liability. An unfunded liability occurs when the money projected to be available for future pensions (assets) is less than the projected costs of paying for those pensions (liabilities).
Every three years the plan undergoes an actuarial valuation to assess the financial health of the plan. The most recent valuation conducted as at August 31, 2012, showed the plan had an unfunded liability of $105 million. In this case, the board is required to increase contribution rates to restore the plan to full funding.
If you retire before 65, your pension from the College Pension Plan will include a lifetime pension and a temporary monthly payment called the bridge benefit. The bridge benefit stops at age 65 or the death of the plan member, whichever comes first.
For every month you make, or are deemed to have made, a contribution to the plan you earn a month of contributory service. Contributory service is used to determine if you are eligible for a pension and whether a pension will be reduced (and by how much) if you decide to retire before age 60.
Cost-of-living adjustments (COLA)
A cost-of-living adjustment is an increase to your monthly pension payment. COLAs are not a guaranteed benefit of the plan. Adjustments are currently granted in January each year and are based on changes in the cost of living, as measured by the Canadian Consumer Price Index, and the financial health of the plan’s inflation adjustment account. Every three years, the plan undergoes an actuarial valuation to assess its financial health. Based on the results, the COLA is capped at a level required to keep the plan sustainable. The current cap of 1.83 per cent will be in effect up to and including 2016. Once granted, COLA becomes part of your basic lifetime pension.
Early retirement reductions
Currently, if you retire at age 60 (with at least two years of service) there is no early retirement reduction. But if you retire before age 60 with less than 35 years of contributory service your lifetime pension will be reduced by 3 per cent for every year that you are under age 60, to a maximum of 15 per cent.
On or after January 1, 2016, if you decide to retire before you have 35 years of contributory service, your lifetime pension will be reduced by 3 per cent for every year that you are under age 65, to a maximum of 30 per cent.
Highest average salary (HAS)
The salary used in the calculation of your pension benefit. It is the average of your highest five years of annual salaries.
The lifetime pension amount is paid to you starting at retirement and continues until you die. Some or all of it may continue to your beneficiary, depending on the option that you choose at retirement. It does not include the bridge benefit or temporary annuity.
Pensionable service is the actual time worked while contributing to the plan. One full month of pensionable service is credited when a member works full time for a month. If a member worked part time (for example, 50 per cent) half a month of pensionable service will be credited. Pensionable service is used in the calculation of a monthly pension benefit.
The College Pension Plan partners are: BC Government and Service Employees’ Union (BCGEU); Government of British Columbia; Federation of Post-Secondary Educators of BC (FPSE); and Post-Secondary Employers’ Association (PSEA).
Year’s maximum pensionable earnings (YMPE)
The maximum salary upon which Canada Pension Plan contributions are made. For 2014, the YMPE is $52,500.