Lump-sum pension payments

You may be able to receive a lump-sum payment in lieu of a monthly pension. Here's what you need to know about eligibility, tax considerations and more.

You may be eligible to receive a lump-sum payment of your pension. This could apply if:

• You ended your employment with an employer participating in BC's Municipal Pension Plan before your earliest retirement age and are transferring your pension’s commuted value to a registered retirement savings vehicle
• You have an illness or disability that has shortened life expectancy
• You are a limited member, the plan member has reached their earliest retirement age and you choose to receive a locked-in commuted value payment
• You are a limited member and the plan member has removed their funds from the plan
• You are the beneficiary of a plan member
• The commuted value of your pension benefit is less than 20 per cent of the year's maximum pensionable earnings in the year you apply for your pension (small benefit refund)

If you are eligible for and select a lump-sum payment, it will usually be transferred to a locked-in retirement savings vehicle such as a LIRA (locked-in retirement account) or other eligible retirement plan.

If you choose this option, the Income Tax Act limits the amount that you can transfer to a locked-in retirement savings vehicle. You will receive any amount over this limit directly.

We will deduct income tax from the cash payment portion of the commuted value that is not transferred to a locked-in retirement savings vehicle. If this applies to you, we will deduct tax at the following rates for Canadian residents:

• 10 per cent for payments of $5,000 or less
• 20 per cent for payments of $5,000.01 to $15,000
• 30 per cent for payments of $15,000.01 or more

If you are not a Canadian resident, the amount of tax we deduct is based on your country of residence (25 per cent is common). Contact the Canada Revenue Agency (CRA) for the applicable tax rates.

We will send you a cheque for the cash payment portion of the commuted value once we receive all the required documents. You may wish to contact the CRA to learn more about how to reduce your tax payable. You may also want to talk with an independent financial adviser.