Question from a staff member: I’m planning on retiring soon, and expect my pension to be based on the minimum guarantee. Will the proposed plan changes mean that my early retirement pension at age 60 would be reduced by 30%?

Bob says:


The Pension Benefits Act states unequivocally that accrued benefits cannot be reduced.

Pension payments for a member retiring early at age 60 on the minimum guarantee would remain at the current 10% reduction applied to the benefit formula (2% for each of the five years of early retirement). Proposed plan changes would only impact future service on a going-forward basis. Details of the technical changes can be found on the Human Resources website.

For example: if a 30-year plan member retires at age 60, one year into the new rules, the accrued benefit from the first 29 years would be handled under the old rules (i.e. 2% reduction per year early). Only the last year would be factored in under the new rules. If that member retired two years into the new rules, 28 years would be handled under the old rules and two under the new, and so on.

The same would apply to post-retirement indexing, with only the post-implementation years subject to the new rules, which would mean that the pre-implementation accrued benefit would continue to be indexed according to the excess interest formula.

In other words, the technical changes applicable to the minimum guarantee could only have a gradual impact on pensions at the outset, and in practical terms would take a generation to be fully implemented.

Posted in: The Pension Puzzle: Ask Bob!

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