Members > Pensions 101: Understanding your pension > How we calculate your pension

How we calculate your pension

Understanding your pension

How your contributions are determined

What are your options and entitlements?

How the Plan is funded

The pension calculation

Member FAQ -
Contribution formula and Pension calculation

Member Handbook -
Normal retirement pension
How is the normal retirement pension calculated?
Calculating your reduced pension

The CAAT Pension Plan is a Defined Benefit Plan. This means that when you retire, you will receive a pension that is calculated based on a fixed pension formula.

In Canada, the most common Defined Benefit pension formulas are based on a combination of length of service and/or income:

Flat Benefit formulas normally calculate pensions based on the members' years of service;
Career Average Earnings formulas use the average income over the course of an employee's membership;
Final Average Earnings formulas are based on the members' earnings at the time of retirement;
Highest Average Earnings formulas base the calculation on the highest average earnings for a specified number of years of membership.

The CAAT Plan's pension formula is a Highest Average Pensionable Earnings formula which uses your five consecutive years of highest earnings during your membership in the Plan. This formula is meant to maximize your pension by considering the 60 month period when your earnings were highest. This usually - but not always - takes place in the years immediately prior to retirement.

Here is the CAAT Plan's pension formula

1.3%	x	Highest Average Pensionable Earnings up to the AYMPE	x	Pensionable Service
plus
2.0%	x	Highest Average Pensionable Earnings above the AYMPE	x	Pensionable Service

Your Highest Average Pensionable Earnings (HAPE)are calculated by totalling your earnings during the five consecutive years when your earnings were highest, dividing by 60 and multiplying by 12. If you have not been a Member of the Plan for five years, your total earnings are divided by the number of months of Pensionable Service you have, then multiplied by 12. If you are an Other than Regular Full-time (OTRFT) Member, your Earnings are annualized before averaging.
The YMPE is the Year's Maximum Pensionable Earnings as defined annually by the Canada Pension Plan (CPP). It is the maximum amount of earnings on which you pay into the CPP each year. To get the Average YMPE (AYMPE) for the pension calculation, the YMPE for the year you retire plus the four previous years is averaged (divided by 5). As with the contribution formula , the pension formula takes into account the CPP contributions that you and your College have made during the course of your career. The calculation only uses 1.3% up to the AYMPE as it works together with your CPP pension.
Pensionable Service is the total of all the months and years of employment during which you contributed to the CAAT Pension Plan. If you purchased any eligible Service, such as Maternity/Parental Leave or unpaid Leaves of Absence during your membership, it will be included in your total Pensionable Service.

Here is an example of the pension calculation

A Member retires in 2010 with 20 years of Pensionable Service and Highest Average Pensionable Earnings of $52,380.00.

The AYMPE for 2010 is $44,840.00.
The difference between the HAPE and the AYMPE is $7,540.00 ($52,380.00 - $44,840.00)

1.3%	x	$ 44,840.00	x	20	=	$11,658.40
plus
2.0%	x	$7,540.00	x	20	=	$3,016.00
Total					=	$14,674.40

The annual lifetime pension that this Member will receive if she retires at age 65 is $14,674.40.

Calculating your Pension

Every CAAT Pension Plan Member's pension is calculated using the same formula. Because that formula is fixed, you don't have to wait for retirement to receive an estimate of your pension. The CAAT Plan offers options for you to find out the approximate amount of pension you have earned at any time during the course of your membership.

Consult your Member's Annual Pension Statement to find out how much you could receive based on data from previous years.
Use our online Commuted Value, Pension and Service Purchase Estimator to calculate the approximate amount you will receive and to project how much your future pension could be.
If you are within 5 years of retirement, you can contact the CAAT Plan directly. Each Member is allowed one pension estimate per calendar year from the Plan. This estimate can include up to three retirement scenarios (e.g. changing the retirement date).

Eligibility

To begin collecting your pension, you must be Vested, that is, you must have accumulated two years of Pensionable Service or Plan membership. If you reach the Plan's Normal Retirement Age of 65 with less than two years of Pensionable Service or Plan Membership, you are automatically Vested and can begin collecting your pension. You must start your pension by the time you turn 71, even if you are still working, however once your pension starts, you have to stop contributing to the plan.

Retiring Early

The earliest you can begin collecting your pension is age 50 if you have 20 years of Pensionable Service, or age 55 no matter how much Pensionable Service you have. If you opt for an early retirement, your pension will be calculated using the same pension formula shown above. However, unless you qualify for one of the early unreduced retirement provisions (the 85 Factor or the 60/20 Rule), your pension will be reduced.

The reduction applied to your pension is 3% per year for each year or partial year you are away from qualifying for an unreduced pension or turning 65. (For example, if you are 2 years away from qualifying for the 60/20 Rule, your pension will be reduced by 6%.) It is important to note that the reduction to your pension is permanent - your pension will not increase when you turn 65. Your Bridge Benefit (the additional early retirement benefit you will receive until you turn 65) will also be reduced by the same amount. To find out more, consult our Pamphlet, Early Retirement which offers a detailed look at your early retirement options and eligibility requirements.

How your contributions are determined

What are your options and entitlements?

How the Plan is funded

December 2009