Taking time off work? Buy your service and boost your pension
Learn the why and how of buying service for a leave
There are many reasons you may take a leave from work. If you need to take time off work for personal reasons, you may be able to receive a percentage of your regular paycheque while on a leave of absence. In other cases, you may need to take an unpaid leave.
During your time off, you typically won’t make contributions to your pension plan. This could affect the amount of pension you receive once you’re retired. Also, when you’re not contributing, your employer isn’t either, so you are giving up their contributions as well.
This article looks at the types of leave available and different options for buying your service. It also looks at important deadlines that could help you save money.
Types of leave available
The most common leaves taken are maternity, parental and compassionate care. Other leave types under the Employment Standards Act (ESA) cover injury or illnesses (including COVID-19), the disappearance or death of a child and domestic or sexual violence. For complete information on any of these, refer to the ESA.
If you need time away that does not fall under any of the ESA-approved leave types, you may want to consider taking a “general” leave. Your reasons for taking a general leave are up to you and can include travelling, pursuing a hobby or attending a course. You must arrange a general leave with your employer.
Buy service to maximize your pension
Buying service for the time you are on leave may increase your pension or allow you to retire with an unreduced pension earlier. When you buy service, you increase both your pensionable and contributory service. Pensionable service is used to calculate your pension at retirement. Contributory service determines if your pension will be reduced and by how much.
Your purchase options depend on the type of leave that you take:
- If your leave falls under the ESA, you can choose to make continuous contributions during your leave, or you can make a lump-sum payment after your leave ends. Your employer will pay its share of an ESA-approved leave of absence.
- If you take a general leave, you can only make a lump-sum payment. You are usually required to pay the whole cost of the leave of absence, unless you have a separate agreement with your employer.
You can use the personalized purchase cost estimator in My Account to see how buying service could increase your monthly pension. If you decide to buy your service, simply fill out the Purchase of Service Application form and send to your employer.
Save money by buying sooner
You have five years after the end of your leave to buy your service, but it may be to your advantage to buy it sooner. The cost is based on your salary, plus the member and employer contribution rates at the time you apply to buy service. You may want to buy service earlier, before potential increases to your salary or contribution rates make it more expensive.
Pay with your RRSP
If you don’t want to pay cash, you can use your RRSP to cover all or part of the cost of buying service. Once we process your application, we will send you a Statement of Cost. If you’re considering using your RRSP to buy your service, contact your financial institution as soon as you receive your Statement of Cost.
For more information, see the related links on this page.