Death Before Retirement

It’s difficult to think about what will happen to your loved ones after you pass away. One thing you may want to know is what happens to your pension. We’re here to make sure your wishes are carried out. In this section, we’ll look at what happens if you pass away before you begin collecting your pension.

It’s very important that we’re contacted as soon as possible after your death. Once we have the documentation we need, we can tell the people who are entitled to receive a benefit about their options.

What those options might be depends on whether or not you were vested at the time you passed away.

If You Had Fewer than Two Years of Service (Not Vested)

Your spouse or partner will be entitled to a refund of your PSPP pension contributions, plus interest.

If you do not have a spouse or partner (or if they have signed a waiver giving up the right to a benefit if you pass away before retirement), then your chosen beneficiaries will be entitled to your contributions, plus interest.

If you do not have a beneficiary, your contributions and interest will be paid to your estate.

Relationship Entitlement
Spouse or partner (no pre-retirement death waiver) Refund of member contributions, plus interest
Beneficiary (no spouse or partner, or spouse or partner has waived benefit) Refund of member contributions, plus interest

If You Had Two or More Years of Service (Vested)

Your spouse or partner will be entitled to a monthly pension for life which would start immediately, or a one-time payment based on the commuted value of the pension.

The monthly pension will continue even if your pension partner is working, re-marries or moves outside Canada.

Commuted value lump-sums are normally transferred to a Locked-In Retirement Account (LIRA). Any non-locked funds are paid as a taxable cash lump sum payment or to a Registered Retirement Savings Plan (RRSP).

There are limits to the amount of funds from a pension payout that can be tax-sheltered. Due to these limits, your payout may also contain some funds known as tax rule excess or Maximum Transfer Value excess that must be taken as taxable cash. This means income tax is withheld and a T4A is issued for tax reporting purposes.

LIRAs have strict rules about how and when the funds within them can be accessed. Normally, money cannot be taken from a LIRA until the holder reaches age 50, but you can get more details about converting LIRA funds from the Government of Alberta's Private Sector Pensions page.

If you do not have a spouse or partner (or if they signed a waiver giving up the right to a benefit if you pass away before retirement), then your chosen beneficiaries will be entitled to a one-time payment based on the commuted value of the pension. This benefit is paid out as taxable cash.

If you don’t have a beneficiary, the benefit will be paid to your estate.

Relationship Entitlement
Spouse or partner (no pre-retirement death waiver) Pension for life OR Commuted value
Beneficiary (no spouse or partner, or spouse or partner has waived benefit) Commuted value