Canadian Government Pension Plans for Retiring Lighthouse Keepers

All Canadian government employees who are eligible for retirement are eligible for:
The Public Service Pension Plan (PSPP)
Canada Pension Plan (CPP)
Old Age Security (OAS) pension at age 65

You are entitled to a Public Service pension (immediate annuity), if you retire:(source)

  • at or after age 60 with two (2) or more years of pensionable service; or
  • at or after age 55 with 30 or more years of pensionable service.

A Public Service pension is calculated according to the following basic pension formula:(source)

2 per
cent

 X 

number of years of
pensionable service

 X 

your average salary for the five
consecutive years of your highest-paid
service

 

Maximum Pension Payable To You Is ONLY For 35 Years Which Equals 70%.

 

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1. Public Service Pension Plan (PSPP)

The Public Service Pension Plan is administered by Public Works and Government Services Canada (PWGSC)

There is very excellent pension information here on their main website for newly retired members, such as facts  on the following topics:

Who can participate in the pension plan? (source) Employees working on a full-time or part-time basis (minimum 12 hours per week) contribute to the plan depending on the term of their appointment:

  • If you are an employee appointed for an indeterminate period or hired for a period of more than six months, you and your employer, the federal government, begin to make contributions to the PSPP from the beginning of your employment;

  • If you are hired for a term of six months or less, you will begin to contribute to the plan after completing six months of continuous employment.

In addition, you and the federal government, like all Canadian workers and employers, must also contribute to the Canada Pension Plan (CPP), if you work outside Quebec, or the Quebec Pension Plan (QPP), if you work in Quebec. 

Now, please note the following as it is not explained very well to most employees when they start work. (emphasis is mine) 

“When the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) were introduced on January 1, 1966, the federal government, like most Canadian employers offering a pension plan for their employees, decided to co-ordinate the new CPP/QPP with the Public Service pension plan . It did this so that its employees would not have to set aside a greater proportion of their salary for retirement savings.” (source 2008-03-04

“The co-ordination of the Public Service pension plan with the CPP/QPP affects not only your contributions but also your benefits. You contribute less to the Public Service pension plan on earnings up to the maximum covered by the CPP/QPP ($44,900 for 2011) and your Public Service pension is reduced to partially recognize benefits payable from the CPP/QPP. This means that Public Service pension plan benefits are reduced automatically by a standard formula once you reach age 65 (which is the normal age of eligibility for CPP/QPP), or if you are entitled to draw CPP/QPP disability benefits at any age.” (source

Once the amount of the reduction is calculated, it is then deducted from the Public Service pension you had before age 65.”(source

This means that at age 65 you will be getting less pension than any other equivalent private sector employee! It is partially made up for by the OAP, but private sector gets Pension+CPP+OAP. The government employees get “reduced pension”+CPP+OAP

A new percentage for calculating this reduction was introduced in 2007. You can find the paper here – Improvement to the three major public sector pension plans – Tax implications. 

A last couple of points to bring to your attention:

  • Increasing your pension – to benefit further from the pension plan, members can generally transfer accrued pension credits in another pension plan or purchase periods of past service.(source

  • Survivors and eligible children are entitled to certain benefits.(source

  • Pensions to plan members and their survivors are indexed to protect their purchasing power. This means that benefits are adjusted to reflect increases in the Consumer Price Index.(source

  • When a person is on pension, a statement is given at the begining of every year and you also receive a copy of the Client Service Bulletin which lists changes, notices, and other interesting information. 

  • A pensioner is also eligible to retain his Public Service Health Care Plan (PSHCP) – originally called GSMIP; his dental plan, now called Pensioners Dental Services Plan (PDSP); and his Supplementary Death Benefit (SDB) insurance.

2. Canada Pension Plan (CPP)

As early as age 60, you can apply for Canada Pension Plan (CPP) benefits. More information can be found here (source).

3. Old Age Security (OAS) (originally known as Old Age Pension (OAP) 

Only at age 65, can you can apply for Old Age security (OAS) benefits. 

More information can be found here (source).

More information is available on the Canadian government source web pages highlighted above and from the links below. 

Treasury Board of Canada – Secretariat 

 – Public Service Superannuation Act of Canada

 – Federal Public Service Retirements 

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55/30 Rule for Retirement – One thing a lot of employees have heard about and do not understand fully is the 55/30 Rule for Early Retirement from the Public Service. Here are the RULES as laid down by the Federal Public Service Superannuation Act:

The 55/30 rule is met when and only when two conditions are satisfied: the employee is 55 years of age or older and has contributed 30 or more years of pensionable service.

The 60/2 rule is met when and only when two conditions are satisfied: the employee is 60 years of age or older and has contributed 2 or more years of pensionable service.

Retirement at eligibility means that an employee retires within the year of meeting the criteria of one of the two pension rules, avoiding penalties.

Retirement after eligibility means that an employee defers the date of retirement by more than one year beyond the date of meeting the criteria of one of the two pension rules, also avoiding penalties.

Retirement before eligibility means that an employee retires before meeting the criteria of one of the two pension rules, therefore incurring a penalty.

The term penalty refers to a reduction in the annuity received during retirement because either the age or years of pensionable service conditions of the pension rule is not fulfilled. For example, if an employee retires at 54 with 27 years of pensionable service, the annuity is penalized by 15%. If the unreduced annuity would have been $20,000 per annum, the reduced annuity would be $17,000—a $3,000 per year penalty. (More details can be found within the PSSA Website).

If an employee satisfies one of the two pension rules (eligible), retirement is possible with an indexed pension equal to a given percentage of the average annual salary received during any consecutive five-year period of pensionable service. An employee gets 2% for each year of pensionable service to a maximum of 70% (35 years). The pension plan is synchronized with the Canada Pension Plan (CPP) and with the Quebec Pension Plan (QPP) for employees in Quebec. Consequently, at age 65 or in case of disability, the annuity paid from the Public Service Pension Plan is reduced to take into account the amount received from CPP/QPP pension.

Full pension is reached when an employee contributes 35 years or more, which means the percentage used to calculate the annuity is 70%.

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Disclaimer:Always check the Treasury Board of Canada – Secretariat website. The information here will be kept up to date as new laws come into force, but the information on this page is only to bring certain points to your attention. It is not a complete record of all pension changes. – JC

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