Your lifetime pension is calculated using a formula that’s based on your highest average pensionable earnings, all your pensionable service, and your age. Once you retire, your pension is paid for the rest of your life.
What happens to my pension if I retire before age 65?
If you retire before age 65, that’s called ‘early retirement.’ Early retirement pensions are reduced to reflect the fact that you receive the pension for longer. This early start adjustment is based on a reduction of 3% per year for each year you are away from your earliest unreduced date.
Different early retirement provisions apply to members who start their pension after being deferred members. Read starting your deferred pension to learn more about these provisions.
The earliest unreduced date is that date at which you qualify for an early unreduced pension.
If you retire before age 65, you also receive a bridge benefit – an additional pension (also calculated using a formula) paid from your retirement date, until you turn 65. If your pension is reduced, so is your bridge benefit.
800% - your pension is good value
You make contributions throughout your membership and you want to get good value. Did you know that the average retired member can expect to receive 800% of their contributions back in pension payments?
When you retire, your pension is paid to you every month for the rest of your life. After five years in retirement, pension payments will equal or exceed the contributions you made during your membership.
The average member is expected to live to age 90 – above the Canadian average. That means that during retirement the average retired member receives hundreds of monthly pension payments. By age 90, those pension payments add up to nearly 800% of the contributions you made during your membership. When you factor in additional benefits like inflation protection and survivor benefits, that adds up to more than 800%.
Calculating your pension
The formula used to calculate your pension is the same formula used for each Plan member. The variables in the formula are a) your earnings and b) your years of service, and c) your age at retirement. Your age determines if your pension is reduced or unreduced. One of the advantages of belonging to a Defined Benefit pension plan like the CAAT Plan, is that since your pension is based on a formula, you can predict your approximate pension income and identify the best time for you to retire.
Annual pension formula
1.3% x highest average earnings to AYMPE x pensionable service
2% x highest average earnings above AYMPE x pensionable service
Annual bridge benefit formula
If you retire before age 65, you receive an additional payment called a bridge benefit. The bridge benefit is paid every month until you turn 65.
0.7% x highest average earnings to AYMPE x pensionable service
Here's another way to look at the pension formula
If you've seen the retirement planning session, you might have noticed that the formula looks like the graphic on the left. It’s simply another way to show the pension formula, that takes into account any possible reduction for starting early.
How does it work?
If your pension is unreduced, the early start adjustment is 100% because you'll receive all your pension.
If you start your pension early, and it is reduced, the early start adjustment is 100% minus the reduction.
For example, if your early pension were to be reduced, by 9%, then your early start adjustment would be 91%. (100% - 9% = 91%)
This formula would calculate the pension, then multiply the amount by .91 to show the reduced amount.
If you were an active member of the ROM Pension Plan on December 31, 2015, and are still an active member, the provisions that apply to your pension may be different than those outlined on this page. Visit Active members – formerly ROM Pension Plan members for details.
Definitions of terms
Highest average pensionable earnings (HAPE)
These are your earnings during the 60 consecutive months that your pensionable earnings were highest. This design ensures your pension is calculated based on your best earnings.
The Average of the Year’s Maximum Pensionable Earnings. The YMPE is the maximum earnings on which you contribute to the Canada Pension Plan (CPP). On your earnings above the YMPE you do not contribute to CPP. The AYMPE is based on the last year in which you contributed to CPP and is calculated using the YMPE for that year and each of the previous four years.
The total of the years and months of that you contributed to the pension plan. The longer you contribute to the Plan, the higher your pension will be.
“PRO” TIP – Watch your pension grow throughout your career
Your annual statement provides a snapshot of the pension you have earned as of the end of the previous year. It shows your normal retirement date, as well as the dates you’re projected to qualify for an early reduced and early unreduced pension.
Estimate your pension
If you’re curious about what your pension might look like when you’re ready to retire, why not try the 3-Step Pension Estimator? Simply enter some basic data, including your date of birth, your highest average earnings and total pensionable service (you can find these numbers on your most recent annual pension statement), and let the Estimator show you your projected retirement dates and estimated pension amounts. Use your annual statement in conjunction with the 3-Step Pension Estimator to model any retirement scenario you like.
If you are within 5 years of retirement, you can receive up to 3 pension estimates per year directly from the Plan. To do so, complete and sign the Pension Estimate Request form. The form must be signed by the member requesting the estimate.
The more service you accumulate, the bigger your pension will be
Your pensionable service is a crucial component of your pension calculation. The more service you have, the larger your pension will be. Service is also a component in reaching your earliest unreduced date – the date before age 65 that you can retire with an unreduced pension. Note that different early retirement provisions apply to members who start their pension after being deferred members. Read Starting your deferred pension <LINK> to learn more about these provisions.
Your pensionable service is based on the time you were working and contributing to the CAAT Plan, and any service accrued while you received workplace disability benefits. Not only that, but the CAAT Plan also provides two options to increase your service: service purchases and transfers.
Services and transfers
To learn if you’re eligible for a purchase or transfer, ask yourself the following questions:
- Did you work part-time for your participating employer before joining the Plan? Did you have an unpaid leave of absence during your membership? If so, you have breaks in your pensionable service. Filling those gaps can increase your pension and help you retire earlier.
- Were you ever a member of a Canadian registered pension plan before working for an employer that participates in the CAAT Plan? If so, you may be able to transfer your previously earned pension into the CAAT Plan, enabling you to retire sooner with a larger pension.
Any purchase or transfer must be completed before you terminate employment. If you think you have breaks in service, or service that could be transferred into the CAAT Pension Plan, there’s no better time to explore that option. Visit our page “Increasing your service” to learn about the different types of purchases and transfers, and the process. While you’re there, use the online ACE Tool to get a general estimate of the cost of your purchase before asking for a formal quote.