TO: All Participating School Boards and Participants
FROM: Howard Van Mersbergen, Executive Secretary-Treasurer
This document is designed to provide a simple but meaningful comparison between the retirement benefits payable under the CSI Pension Plan and some of the pension plans for public education teachers. The plans for Ontario, Alberta and British Columbia have been considered as representative of public education plans across the country and are used for this comparison. There are two segments to this document – a description of plan provisions and sample benefit calculations.
Description of Plan Provisions
The CSI Pension Plan’s main benefit provisions are listed side by side with the Teachers’ pension plans in each of Ontario, Alberta and British Columbia on three separate pages. In order to fully understand these charts, a few terms have been defined below:
FAE – Final average earnings is the average annual wage earned by a pension plan member during their final years of active membership in the plan. Final average earnings are usually calculated over a period of 3-5 years, depending on the provisions of the plan.
YMPE – This is the Year’s Maximum Pensionable Earnings as defined in the Canada Pension Plan. The YMPE is the level of employment earnings covered by the CPP each year. Participants make contributions each year on their employment earnings up to the YMPE and retirement benefits are earned on those same earnings each year. The YMPE increases each year, usually by a percentage related to the increase in average wages in Canada. The YMPE for 2002 is $39,100.
CPI – This is the Consumer Price Index, a common indicator used to calculate inflation.
Bridge – A temporary pension paid to an early retiree between early retirement date and age 65.
Sample Benefit Calculations
There are two sample retirement calculations provided. For each sample, the resulting CSI pension is compared with each provincial plan pension.
The sample shows a married member participating in a pension plan for 30 years and retiring at age 60 with a salary of $50,000 immediately prior to retirement. In this sample, we assumed that the member had participated in the CSI 4% plan for their entire career.
The second sample shows a single member participating for 35 years in a pension plan and retiring at age 65 with a salary of $35,000 just prior to retiring. For this sample, we assumed the member to be in the 3% CSI plan for their entire career.
We have used different salaries, retirement ages, marital status and CSI participation options to show you how these differences affect the amount and type of pension payable under the pension plans being reviewed.
In order to get an idea of what kind of retirement income you can expect to receive from all sources (other than your own private savings), a brief description of the Canada Pension Plan and Old Age Security retirement benefits is included below.
The Canada Pension Plan (CPP) pays an annual pension starting at age 65 that can be as much as 25% of the average YMPE over the last 5 years. In 2002, the maximum pension is $9,465. In order to qualify for this maximum pension, you must have contributed to the CPP for your entire working career AND had employment income greater than the YMPE each year. You can receive this pension starting as early as age 60 but the pension is permanently reduced by 6% for each year it starts before age 65. The annual pension paid to retirees increases with inflation each year and it is payable for your lifetime, with 60% continuing to a surviving spouse after your death. As there are many complex rules dealing with the calculation of benefits in unique situations, these rules should be used only as a general guide.
The Old Age Security pension starts at age 65 and is paid to people based on their length of residence in Canada. This pension is not related to how much people earn during their working career. The maximum annual pension starting at age 65 is currently $5,328. There is no option to start receiving this pension before age 65. Pensions are paid for your life and are increased with inflation every 3 months. Again there are complex rules dealing with various situations so this description should only be used as a general guide.