Plan changes for group 5
If you’re in group 5, learn how the changes affect you and improve your lifetime pension. You are a member of group 5 if you work in public safety as either a police officer or firefighter.
If you’re unsure what group you’re in, check with your employer.
What has changed?
The sections below describe the changes that affect group 5 members.
Move to a flat lifetime pension accrual rate
Pension benefits on future years of service (starting January 1, 2022) will have the flat lifetime benefit accrual rate of 2.12 per cent of your highest annual salary (HAS). This improves equity among members, regardless of income, and the lifetime pension for the majority of members.
Previously, a two-tiered system based on the year’s maximum pensionable earnings (YMPE) was used to determine how group 5 members earned their benefits:
- One rate, 1.63 per cent, was based on your HAS up to the YMPE
- The other rate, 2.33 per cent, was based on your HAS above the YMPE
The YMPE is the maximum salary amount set by the Government of Canada on which you contribute to the Canada Pension Plan.
Moving to a flat lifetime benefit accrual rate (of 2.12 per cent of HAS) means the vast majority of group 5 members will receive a higher lifetime pension. Only the very high income earning members will have a reduced benefit, but they will also have a reduced contribution rate.
If you’re retiring with service before and after the proposed effective date, your benefit will be calculated based on the 1.63 per cent/2.33 per cent benefit accrual being applied on all service up to December 31, 2021, and the 2.12 per cent benefit accrual will be applied on all service after that date.
A new, single contribution rate
There is now a single contribution rate of 11.12 per cent. This includes a contribution to the inflation adjustment account.
Previously, members contributed on a two-tiered system, which was based on the YMPE. One rate, 11.94 per cent, was used on earnings above the YMPE, and the other, 10.44 per cent, was used on earnings below the YMPE.
Individual members may see an increase or decrease in their yearly contributions.
- Members with lower earnings may have an increase in their contribution rate. With this increase comes an improved lifetime pension.
- Members with higher earnings may have decreased yearly contributions because the previous contribution rate of 11.94 per cent on salary above YMPE exceeds the flat contribution rate of 11.12 per cent. With a decrease in contribution rates, members with higher earnings can expect to see lower deductions on their take-home pay.
Decrease in the bridge benefit on future service
The lifetime pension accrual rate will increase and, because of the federal Income Tax Act limits, the bridge accrual rate will decrease to 0.21 per cent from 0.70 per cent. This change applies to service earned on or after January 1, 2022.
The bridge benefit for all service earned before January 1, 2022 will be calculated at the previous rate of 0.70 per cent.
The earliest retirement date in group 5 is age 50. The bridge benefit is payable from retirement to age 65 or death, whichever comes first.
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 5 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 for all group 5 members 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 even if you die before those 10 years past your retirement, 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 future rate fluctuations. Public safety’s share of surplus funds from the 2018 actuarial valuation will be used to fund the account.