Plan changes for group 2
If you’re in group 2, learn how the changes affect you and improve your lifetime pension. You are a member of group 2 if you work in public safety as either a police officer or firefighter and are not a member of group 5.
If you’re unsure what group you’re in, check with your employer.
What stays the same?
- You will retain the current formula for calculating your pension benefit.
- You will see no changes to early-retirement subsidies or your bridge benefit.
- Special agreement rates will not be affected by the plan design changes.
What has changed?
The following sections explain the changes to the rules that affect group 2 members.
A new, single contribution rate
There is now a single contribution rate of 8.92 per cent. This includes a contribution to the inflation adjustment account. Previously, members contributed at two different rates on the portions of their earnings that were above and below the year’s maximum pensionable earnings (YMPE).
Individual members may see an increase or decrease in their yearly contributions.
- Members with lower earnings may have an increase in their yearly contributions. With this increase comes an improved lifetime pension.
- Members with higher earnings may have a decrease in their yearly contributions because the previous contribution rate of 10 per cent on salary above the YMPE exceeds the flat contribution rate of 8.92 per cent. With a decrease in contribution rates, members with higher earnings can expect to see lower deductions on their take-home pay.
The YMPE is the maximum salary amount set by the Government of Canada on which you contribute to the Canada Pension Plan.
Highest average salary of four years instead of five
Part of your pension calculation is based on your highest average salary (HAS), which was your best five years of earnings as a plan member. Your HAS will now be calculated from your best four years of earnings if you are a plan member employed in public safety after December 31, 2021.
With fewer years to average your salary across, your HAS may be higher. This will have a positive impact on your lifetime pension as most group 2 members have a higher salary toward the end of their careers because of wage increases and promotions.
Pension option: A 10-year guaranteed life pension
The normal form of pension has changed from a single life pension without a guarantee to a single life pension with a 10-year guarantee. With this change, you can receive a 10-year guarantee without having your pension reduced.
One way to understand a guarantee on your pension is to think of it as being similar to life insurance. With a 10-year guarantee, you are locking in a guarantee of 10 years of pension payment from the date of retirement. That means that if you die before the end of those 10 years, your beneficiaries would receive the remaining payment of your pension. For example, if you died six years after retirement, they would receive four years’ worth of pension payments.
You are eligible for the new normal form of pension if you are a plan member employed in public safety after December 31, 2021.
Group contribution rate rebalancing account
Members will participate in the group contribution rate rebalancing account, which is an account that helps protect against potential rate fluctuations. Public safety’s share of surplus funds from the 2018 actuarial valuation will be used to fund the account.