Leave Your Pension Benefit With PSPP
If you leave your funds in the Plan, you will be eligible to receive a monthly pension for the rest of your life as early as age 55.
Also, if you ever rejoin the Plan, either through the same or another PSPP employer, you can add new pensionable service to what you have already earned and increase the lifetime pension you will receive. When you leave your funds in PSPP until retirement, you become what is called a deferred member.
Choosing this option does not prevent you from taking your funds out later on, even if you turn 55 in the meantime, so long as you don't rejoin the Plan.
Transfer Your Pension Benefit to Another Pension Plan
PSPP has transfer agreements with several other provincial and federal public sector pension plans.
If you join an employer who participates in one of those plans, you may be able to transfer your PSPP service to that new plan.
If you transfer out of PSPP, you are no longer entitled to receive a lifetime PSPP pension. Once the benefit is taken out of the Plan, you will not be able to change your mind.
If you have CPS, you cannot transfer your pension if you are still contributing to the related plan.
Transfer Your Pension as a Lump Sum to a Locked-In Retirement Account (LIRA)
The lump sum of your pension is known as a commuted value or CV. One way to think of CV is the amount of money that must be set aside today, based on current interest rates, to provide you with your future pension.
In most cases these funds must be transferred to a LIRA, which is a special type of registered retirement savings account designed to hold locked-in pension funds. These funds are then used to provide you with retirement income.
Your Commuted Value Transfer Options Are:
- Transfer your CV to your LIRA and have any non-locked funds transferred to your Registered Retirement Savings Plan (RRSP).
- Transfer your CV to your LIRA and have any non-locked funds paid as a taxable cash lump sum payment.
Because there are limits to the amount of funds from a pension payout that you are allowed to tax shelter, your payout may also contain some funds known as tax rule excess that you have to take as taxable cash.
How much income tax is withheld from my payout?
If you live in Canada, the amount withheld is based on this table:
|Lump Sum Amount
||Federal Income Tax Rate
|$5,000 or less
|Over $5,000, up to $15,000
|More than $15,000
A T4A will be issued with your payment to show how much income you have received and how much tax you have paid. The amount of tax withheld will be based only on the value of this payment. When added to your employment income for the year, you may be required to pay additional tax when you file your income tax return the following year.
If the address we have on file for you is outside of Canada when you receive funds from the Plan, the amount withheld will depend on the country.
How to Transfer to a LIRA
LIRAs have strict rules about how and when the funds within them can be accessed. You can get more details about converting LIRA funds from the Government of Alberta website.
If you transfer your commuted value out of PSPP, you are no longer entitled to a lifetime PSPP pension. Once the benefit is taken out of the Plan, you will not be able to change your mind.
- Before the commuted value can be transferred, you will need to have a LIRA with a bank or financial institution. Your bank or financial institution can assist you with this.
- PSPP can only transfer locked-in funds to a financial institution that appears on the Alberta Superintendent's List of Financial Institutions Offering Locked-In Pension Products.
- PSPP will only send the locked-in funds directly to the approved financial institution, and not to a third party company (such as an investment broker or related company of the financial institution).
- There is no tax withheld from a transfer to a LIRA.
- All funds transferred to a LIRA and the investment earnings on those funds are typically used to purchase an annuity, such as a Life Income Fund (LIF) or Locked-In Retirement Income Fund (LRIF) that will provide monthly payments from pension commencement to the end of the life of the LIRA holder.
- Normally, the earliest a LIRA can be converted to an annuity, LIF or LRIF is the 50th birthday of the LIRA holder. The LIRA must be converted to an annuity before the end of the year in which the LIRA holder reaches age 71.
Start an Immediate PSPP Pension
You are eligible to start your lifetime PSPP pension if you have two or more years of service and are age 55 or older.
If you have CPS, you cannot start your pension if you are still contributing to the related plan.
Start Your Pension at a Later Date
You can wait and start your pension after you turn 55, but you have to start your pension before the end of the year in which you turn 71.
If you rejoin the Plan in the meantime, you will add to your pensionable service, and increase your pension amount.
Transfer Your Pension Benefit to Another Pension Plan
PSPP has transfer agreements with several provincial and federal public sector pension plans in Canada. If you start working for a new employer who participates in one of those pension plans, you may be able to transfer your PSPP service into a new plan.
If you have CPS, you cannot transfer your benefit if you are still contributing to the related plan.