Everyone joins the federal public service for different reasons but for a significant amount of people that reason is the Public Service Pension Plan or also known as the Golden Handcuffs. My aim is to help breakdown what the Public Service Pension Plan is and how it affects you. To start off, the Pension Plan provides employees with retirement income during their lifetime and in the event of death, it will instead provide an income for survivors and eligible children.
Who is Enrolled into the Pension Plan?
Full-time or part-time employee (minimum 12 hours per week) are enrolled into the plan:
- from your first day at work, if you are appointed on an indeterminate basis;
- from your first day at work, if you are hired for a period of more than six months; or
- after six months of continuous employment, if you were originally hired for a period of six months or less.
While working for the Federal Public Service you might have heard people saying they are in Group 1 or that you are in Group 2 but what does that really mean? Let’s break it down using charts cause I love charts.
| Group 1 (Plan member before 2013) | Group 2 (Plan member on or after 2013) | |
|---|---|---|
| Age to received unreduced pension | 60 | 65 |
| Low-rate contribution (PSSA Low) | 9.35%* | 7.94%* |
| High-rate contribution (PSSA High) | 12.25%* | 11.54%* |
| Maximum pensionable service | 35 years | 35 years |
| Contribution Rate after 35 years | 1% | 1% |
| Indexed to inflation | Yes | Yes |
Great Neruson, you just gave a chart. What does that even mean?
Well, let’s break it down what each plan really means. Basically Group 1 gets to retire at age 60 (or 55 with 30 years of service) with no reduction to your pension. Since they get to retire a little earlier, they have to pay a higher contribution amount. Group 2 gets to retire at 65 (or 60 with 30 years of service) with no reduction to your pension. Since Group 2 needs to work 5 years longer, the contribution rate is also lower.
“HOLD UP!” You may say looking at the low-rate and high-rate contribution amount. What does that even mean? This is based on the maximum pensionable earnings for the year, which changes each year. For 2024, if you earned $68,500 or less you contribute 7.94% under Group 2 but any earnings above $68,500 will have a contribution rate of 11.54%. You can figure out when you are paying the low-rate or high-rate by looking at your paystub and seeing the line that says PSSA. If it says PSSA Low, it means you are paying the lower contribution rate but if it says PSSA High then you know you hit the pensionable earnings cap for CPP ($68,500 for 2024) and are now paying more.
How Much Will I Get from My Pension Plan?
There is a formula to help determine your Annual lifetime pension which is primarily based on your best 5 years of service and amount of pensionable years. The Basic Pension Calculator is an excellent tool to help determine your pension amount.
However if you are like me and want to know the formula and math behind your pension, it is as follows:
| 1.375% | X | Your average salary up to the AMPE | X | Your years of pensionable service (max 35 years) |
| PLUS | ||||
| 2% | X | Your average salary in excess of the AMPE | X | Your years of pensionable service (max 35 years) |
Now that you know the formula, you are definitely going to use the Basic Pension Calculator instead, right? Although I love math, I don’t think my audience appreciates it as much as I do, but the basic idea is the more you earn and the longer you work, the more money you get in your pension. You can move up the levels and classifications if you want to earn more AND you can support your union during bargaining to ensure you get a fair contract to ensure that your wages keep up with inflation.
Talking about unions, let’s talk about the National Association of Federal Retirees (NAFR). NAFR is not exactly an union but you can think of them as one. They help protect the hard-earned pensions and benefits of retired members of the federal public service, Canadian Armed Forces, RCMP and retired federally appointed judges as well as their partners and survivors since 1963. They were instrumental in the creation of the Pensioners Dental Service Plan (PDSP). Give them a look and decide if you want to join their over 170,000 members strong that are located coast to coast to coast and you don’t need to be retired to even join them!
Still here? Got some questions? Well you know what time it is then.
Quick Fire Question Rounds time. LET’S GO!
If you LOVED this article and want to learn more about pensions and retirement benefits, more articles are on there way and will be linked below!
Golden handcuffs Part 2: TBD
Golden handcuffs Part 3: TBD
Helpful Resources:
Basic Pension calculator – Calculate your yearly/monthly pension amount
Public Service Pension Plan Web application – Only available on the Employer’s Network, access your plan information, tools to estimate service buyback and more!
Video Series: You and Your Pension Plan
Public Service Pension Plan – Resource Hub
Contact the Government of Canada Pension Centre for your specific Pension related questions
Telephone
- Toll-Free
- 1‑800‑561‑7930
- Monday to Friday
7 am to 5 pm Eastern time
- Outside Canada and the United States
- 506‑533‑5800
(collect calls accepted) - Monday to Friday
7 am to 4 pm Eastern time
- 506‑533‑5800