My pension amount
The Desjardins Group Pension Plan, or DGPP, is a defined benefit plan, which means that it is designed to provide me with a retirement income, in the form of a pension, for the rest of my life.
For my service up to December 29, 2012, my pension amount will be determined based on my average earnings for my 5 best paid years at Desjardins, called salary5.
For my service starting on December 30, 2012, my pension amount will be determined based on my average earnings for my 8 best paid years at Desjardins, called salary8.
Two other factors will impact my pension amount:
-the number of years during which I was an active member in the plan; and
-age at which I retire.
To learn the pension amount that I will receive from my pension plan at retirement, I need to consult my personalized annual statements. If the dates presented on my statement don't suit me, I can use the simulator, which allows me to calculate projections as often as I like.
But before talking about calculations, let's look at a few basic definitions:
Salary5, or salary8, means the average earnings for the five or eight best paid years worked at Desjardins, whether consecutive or not. The salary considered in this calculation includes regular base salary, retroactive earnings or the lump sum amount in lieu of the normal salary increase. Some income, like bonuses and paid overtime, are not included.
YMPE5 is the maximum pensionable earnings for the last 5 years, as established by the QPP or CPP. To learn this maximum, which changes every year, I need to visit the QPP or CPP website.
The actuarial adjustment is the adjustment that applies to my pension if I retire before age 65. It takes into account the fact that I am receiving my pension earlier and for a longer period of time.
Credited service is the total number of years during which I was an active member of the plan that is used in my pension calculation. If I worked part-time, fractions of years will be credited.
Years of continuous service are the total of my years of continuous service at Desjardins Group. These years accumulate even if I am working part-time or if I am on parental leave or leave without pay. Temporary employment periods during which I did not contribute are not included. Continuous service is used only in calculating the actuarial adjustment for the years of service before 2009.
In summary, to calculate my pension, I need to know my salary8, the YMPE5, my credited service and my years of continuous service. If I have years of service accumulated before 2013, I also need to know my salary5. I can find all of this information on my personalized annual statement.
Because changes were made to the Plan on January 1, 2009 and on December 30, 2012, my pension calculation must be done in three parts: A, B and C.
Part A deals with service up to December 31, 2008, part B deals with service from January 1, 2009 to December 29, 2012, and part C deals with service starting on December 30, 2012.
A)
For each year of credited service before 2009, the pension is determined using the following formula:
1.3% of salary5 up to YMPE5
plus
2% of salary5 over the YMPE5
B)
For each year of credited service from January 1, 2009 to December 29, 2012, the pension is determined using the following formula:
1.5% of salary5 up to YMPE5
plus
2% of salary5 over the YMPE5
C)
For each year of credited service starting on December 30, 2012, the pension is determined using the following formula:
1.5% of salary8 up to YMPE5
plus
2% of salary8 over the YMPE5
The total accumulated pension is thus equal to the pension from part A PLUS the pension from part B PLUS the pension from part C, and is payable if I retire at age 65.
The pension paid by the DGPP must also respect tax limits.
Once I know my pension amount, I must also consider the age at which I want to retire because, as mentioned earlier, if I decide to retire early, that is, before age 65, an actuarial adjustment may apply to my accumulated pension. The actuarial adjustment differs based on whether it applies to part A, part B or part C of my pension.
For part A of my pension, no actuarial adjustment will apply if I retire at age 57 and if the total of my age plus my years of continuous service is equal to or greater than 85.
If this is not the case, an actuarial adjustment will apply. I am going to consult the table available on the website for more information.
For parts B and C of my pension, if I retire at age 62, no actuarial adjustment will apply. If I retire before age 62, an adjustment of a certain percentage for each year before I turn 62 will apply. For example, if I retire at age 60, two years before I turn 62, the adjustment percentage will be multiplied by 2.
To make sure that you have a clear understanding of how the pension is calculated, I am going to give you another example: John. John is 50 years of age, currently earns an annual salary of $40 000 and currently has 10 years of participation in the DGPP. Let's assume that John gets a 2% raise every year and retires in 10 years at age 60. His salary5 will be $46 885, his salary8 will be $45 542 and the YMPE5 will be $59 898.
Given that John will have 6 years of participation in the DGPP before January 1, 2009, 4 years from January 1, 2009 to December 29, 2012 and 10 years after December 30, 2012, here is how his pension will be calculated.
For part A: 1.3% of salary5 of $46 885 multiplied by the 6 years of participation before January 1, 2009, less an actuarial adjustment of 15%, gives John an annual pension of $3 108.
For part B: 1.5% of salary5 of $46 885 multiplied by the 4 years of participation between January 1, 2009 and December 29, 2012, less an actuarial adjustment of 8%, gives John an annual pension of $2 588.
For part C; 1.5% of salary8 of $45 542 multiplied by the 10 years of participation after December 30, 2012, less an actuarial adjustment of 8%, gives John an annual pension of $6 285.
By adding parts A, B and C, John will be entitled to an annual pension of $11 981 beginning at age 60 and for the rest of his life.
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