Time for a minivan? Your pension and your children
Having a child is a life‐changing event that brings new responsibilities. It's a good time to consider some work and pension‐related issues.
Top up your pension
When you take time off work to look after your child, you won’t be receiving your regular salary or contributing to your pension. This will affect your current income, and it will also affect your pension when you retire. Remember, your pension is calculated based on your years of pensionable service and the average of your five highest years of salary. The more pensionable service you have, the greater your pension.
Although you normally accumulate pensionable service by working and contributing to the plan, you can also buy back service to cover the period of an approved maternity, parental or adoption leave under the Employment Standards Act (ESA).
When you apply to buy back service, the cost is calculated using the length of your leave, employee and employer contribution rates, and your full-time-equivalent salary. You’ll be responsible for paying your employee share, and your employer will pay its share.
You must meet criteria and timelines under pension plan rules to buy service. The Income Tax Act has its own rules as well.
If you wish to continue making pension contributions while on an ESA leave, you must apply within 30 days of starting your leave by completing a form and submitting it to your employer.
If you are making a lump-sum payment, you must apply to buy service for a leave within five years of the end of that leave or within 30 days of ending your job with the employer that granted the leave, whichever comes first. Sign in to My Account and use the personalized purchase cost estimator to see how much buying your service might cost.
Returning to work part-time?
If you return to work part time after a leave, you will start contributing to the plan again. Your pension contributions and pensionable service will be adjusted to reflect your part-time salary.
Boost your contributory service with a child-rearing credit
Your total pensionable service isn’t the only factor influencing your pension. Your years of contributory service count as well. We use this factor to determine if you’re eligible for an unreduced pension.
You can apply to have the time you took off work to raise your child count as contributory service, called a child-rearing credit. There’s no cost involved – all you have to do is apply, and we’ll add up to five years of time you took off work looking after your child to your years of contributory service.
Protecting your beneficiaries
Your pension may provide some financial security for your family when you die. If you have a spouse, they are automatically your beneficiary and will receive your pension benefit. If you have a child, you may want to name them as an alternate beneficiary in case your spouse also dies or to provide for your child on your death.
Depending on your situation, you may wish to name your child as a primary beneficiary. If you have a spouse, they will have to give up their right to be the automatic beneficiary of your pension for you to do this. Consider also naming a trustee for your beneficiary to manage your pension on your behalf if your child is under age 19.
You may wish to speak with a legal professional to prepare or update your will and to discuss your pension options to best protect your family.
Planning for your new future
Having a child is one of life’s most significant and exciting events. As with other major changes in your life, it’s wise to take a few moments to review your financial situation; you may wish to consult an independent financial adviser about your options.