How life events impact your pension

When you became a member of the Public Service Pension Plan (PSPP) you gained a valuable benefit that ensures you’ll receive pension income payable for your lifetime, so you’ll never need to worry about outliving your money.

One of the great benefits of the PSPP is that it’s designed to help you avoid worrying about managing every aspect of your retirement savings. One of the benefits of being a member of the PSPP is that the investing is done on your behalf. The PSPP Fund is managed by a team of highly skilled investment specialists who make strategic investment decisions to help generate the returns needed to fund your pension. At the same time, maximizing your PSPP pension may require your input, especially when you experience a life event.

A life event can commonly be described as an important event that changes the circumstances of someone’s life. Examples include getting married, separating, having children, and deciding to take a leave of absence from work. Here are some examples of how these life events can impact your pension.

New Job

Now that Jane has become a new member of the PSPP, they have a great opportunity to increase the amount of pension they’ll receive by purchasing additional pension credit from their past eligible service in another pension plan. This is known as a ‘buyback.’

Jane may also be eligible to apply to transfer their pension in another plan to the PSPP under a reciprocal transfer agreement (RTA). It’s important that Jane applies to transfer or buy back any eligible service as soon as possible. RTA transfers have strict application deadlines. For buybacks, the cost generally increases over time, especially after the 24-month costing window ends. Once the window ends, the cost of the buy back is subject to an actuarial costing which will likely be much more expensive.

Marriage or Common Law Relationship

Pensions are an important family asset. If Jane enters into a spousal relationship, they should update their spousal details through their e-services(opens in a new tab) account.

Prior to retirement, they can research what type of survivor benefit would be the best for them and their family if Jane was to pass away.

Having Children

When Jane decides to expand their family, it’s an important time to not only update their beneficiaries, but also to revisit their financial planning priorities including re-evaluating how much money they may require before and after retirement.

Leave of Absence

When Jane takes a leave of absence from work, there are important pension-related decisions to make. Depending on the type of leave and whether it is paid or unpaid, Jane’s PSPP contributions may continue, with or without employer matching. For example, for any unpaid leave longer than 30 days, Jane will need to decide whether they would like to continue contributing while on their leave, or buy back their credit upon their return to work. For paid leaves of any duration, the contributions will continue.

Did you know?

A leave of absence can include parental leave, family medical leave, or educational leave.

Separation or Divorce

If Jane and their spouse end their spousal relationship, there are important considerations regarding Jane’s pension. While Jane is not obligated to divide their pension, they may need to apply to OPB for a Family Law Value. They may also need to provide OPB with a Settlement Instrument that deals with pension division. Finally, Jane should make sure that they update their spousal status, and make any necessary changes to their beneficiary designations, on e-services.

While the list above is not meant to be exhaustive, as we all have various challenges to deal with in our own lives, it is important to understand from the above graphic that there are many different life events that can impact your pension. On OPB.ca, we provide web pages, articles, and other resources to help guide you once you experience a life event.

Change in Employment

If Jane leaves their job, their choice will have an impact on their pension. If Jane moves to a non-PSPP employer, they will be provided with termination options, one of which might be to defer their pension where it will remain protected until they are ready to begin collecting it. If Jane’s new employer has a workplace pension plan, they may also be able to transfer their credit to their current plan under an RTA. If Jane is under 55 years of age, they may also transfer the commuted value of their PSPP pension to another pension plan or retirement savings vehicle.