Your Pension,
Your Future
Simon Fraser University
Faculty Association Seminar
“Do you have a minute to talk
about your retirement years?”
© The New Yorker Collection 1997 Robert Weber from cartoonbank.com. All rights reserved.
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Agenda
• Different pension models
• The SFU Academic Staff Pension
Plan
• The College Pension Plan
• Why join the College Pension Plan?
• Wrapping it up
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The facts: Canadian retirement plans
Many Canadians’ retirement plans include:
• Selling their homes
• Receiving an inheritance
• Working into their retirement years
• Relying on the federal pension benefits
• Winning the lottery
• An RRSP
Less than half of Canadians have an
actual pension plan
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The facts: pension plans
Pension plans come in three basic forms:
• Defined benefit
• Defined contribution
• Targeted benefit
These three forms are designed to allocate risks:
• Longevity
• Investment
• Timing
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The facts: defined benefit plans
• Formula tells members what their
pension will be
• Typically based on years of service in the
plan × salary
• All risk is born by the employer or employers
and active members
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The facts: defined contribution plans
• A member accumulates some money,
which is available at retirement
• Each member bears all the risk
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The facts: target benefit plans
• Money is pooled to provide the pension
• There is a specified targeted amount for
the pension, but it's not guaranteed
• All risk is born by all the members
as a group
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The SFU Academic Staff Pension Plan
• Defined Contribution – Employer pays 10%
into each faculty member’s account.
• Members can add extra, but often don’t
(at least not at the start)
• At retirement, a member can allocate
longevity and investment risk by annuitizing
or the member can bear those risks and
self manage.
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The SFU Academic Staff Pension Plan
• Annuitizing:
− $300,000 would provide a 60 year old
with an income of $1,531/month
− $300,000 would provide a 65 year old
with an income of $1,748/month
• Self Managing – tax laws force withdrawal
earlier than one might like
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The College
Pension Plan
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The basic pension benefit
• Defined Benefit Plan
–Service and Salary (best 60 months
salary)
• Contributions and investment returns
fund the plan.
• 70% of the plan’s assets are from
investment returns
Did you
know?…
The College Pension Plan is
undergoing plan design changes
effective January 1, 2016
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Basic pension benefit is guaranteed
• Actuarial valuations – every three years
• The plan was almost fully funded
(97 per cent) as at August 31, 2012
• Solid investment policies
• Very inexpensive investment management
• Access to wider variety of investment
options
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Defined contribution vs defined benefit
SFU Academic
Staff Pension Plan
College Pension Plan
Contributions and
investment returns
Age, years of service
and salary
Who takes the risk?
You do
Members and employers
Who makes investment
decisions?
You do
Experts
What do you get?
Annuity/RIF
Pension for your lifetime
Early retirement?
Yes
Yes
Health benefits?
No
Yes, access to group rates
Are faculty
contributions required?
No
Yes – enrolment is
mandatory in most cases
Pension payments are
based on…
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Cost
• Approximately 19.2¢ on every dollar gross
–Half from employer, half from
faculty member
• Contributions are tax deductible (on salary
up to approximately $170,000)
• You get the pensionable service for free while
you are on an approved LTD leave
• More information is available at:
www.college.pensionsbc.ca
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Guaranteed benefit
• Monthly income for the rest of your life
• Early retirement option
• Pension = 2% × highest average
salary (HAS) × pensionable service
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Cost-of-living adjustments (COLA)
• May be granted annually
• Based on Consumer Price Index
• Cap in place to ensure sustainability
Future cost-of living increases are not guaranteed but cola once granted is guaranteed
Did you
know?…
A pension worth $1,000 ten years
ago is now paying approximately
$1,195 today.
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COLA
• Is a target benefit in the College Plan
• Current target (in place since 2010) is
a cap of 1.83%
• Paid full inflation in four of the last five years
• Sustainability level is evaluated every
three years
• Agreement in place to raise contributions
(over many years) to increase cap to 2.75%
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Access to health and dental benefits
• Medical, dental and extended health
• Group rates
• Group benefits are not guaranteed
Did you
know?…
A member retiring today will pay
approximately $160/per month for
these benefits. That’s a significant
savings over using an individual plan.
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How can I increase
my pension?
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Past service
• You may have service eligible for pension
purposes
• Actuarial calculation to determine cost
– This is subject to approval by the
College Pension Board of Trustees
• If the board approves the purchase of past
service, you can pay by cash or RRSP or DC
Pension (these funds must be used first)
– Note that you must have RRSP room if you want to
use cash
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Estimated cost to purchase past service
Estimated cost to purchase one year of service prior to 2016
40
45
50
55
60
65
70,000
11,392
12,653
14,284
16,331
17,564
15,590
100,000
16,560
18,408
20,793
23,783
25,778
23,169
130,000
21,727
24,164
27,303
31,235
33,993
30,748
Estimated cost to purchase one year of service after 2015
40
45
50
55
60
65
70,000
9,929
11,059
12,509
14,320
16,293
17,684
100,000
14,185
15,799
17,870
20,457
23,275
25,263
130,000
18,440
20,538
23,231
26,594
30,258
32,842
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Purchase of service
• Leave of absence
• Other types
• Deadlines apply
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Why join?
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Why join
• Better benefit
• Studies show that the average benefit
payable from a DB plan is 40% higher than
the average benefit payable from a DC plan
that has the same cost
• Longevity, investment and timing risks
are shared
• Plan can take greater investment risk than
an individual
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The numbers add up
• Benefit from College Pension Plan for a 65 year
old who retires with 22.5 years of service with a
HAS of $120,000 is $54,000/year
• The average SFU faculty association member
between 60 and 64 who has 20–25 years at
SFU, has approximately $245,000 to pay for
their retirement
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If SFU Faculty Association wants to
join the College Pension Plan
• SFU needs to apply to the College Pension Plan
• College Pension Board of Trustees
would decide on acceptance
• Purchase of past service may be possible
– would not be cheap, but would be worth it
• Enrollment would be mandatory for full-time and most
part-time employees if SFU joins
• Board representation is unlikely – Plan Partners
appoint the trustees, but one of them could appoint
an SFU faculty member
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College Pension Plan Website
college.pensionsbc.ca
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Wrapping it up
Income for life
Cost-of-living increases on your pension
Access to health benefits at retirement
Cost-of-living increases are not guaranteed
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Current Federal pension benefits
Canada Pension Plan
$1,038 per month (maximum)
Old Age Security
$585 per month (maximum)
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Questions?
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