How Your Pension is Calculated

PSPP is a defined benefit pension plan. This means that your pension is based on a set formula and not how much you have paid into the Plan. The pension formula takes into account your pensionable salary and years of service, so the longer you contribute to the Plan and the higher your salary, the larger your pension will be.

If you are looking for a fast way to estimate your pension, the following estimator tools are also available:

  • The Pension Estimator, found on this website, allows you to calculate different "what-if" scenarios by entering your own figures for salary and years of service.
  • The Pension Projection Calculator allows you to project the amount of your future PSPP pension based on the pension information we have on file for you. This is available only to PSPP members who can access their personal information on mypensionplan.ca.

Salary

The salary used in the formula is called your highest average salary, which uses the five consecutive years where your average pensionable salary was the highest. Often, but not always, those are the last five years of a PSPP member's career. If you work part-time, your highest average salary is calculated using your  annualized salary.

Five Highest Years of Salary

The pensionable salary used in the formula is your highest average salary, which is the five consecutive years where your average salary was the highest.

In the pension formula, your highest average salary is divided into two parts: above and below the average Year's Maximum Pensionable Earnings (YMPE). The YMPE is the highest level of salary on which Canada Pension Plan contributions can be made. In 2018, the YMPE is $55,900.

The salaries used in your highest average salary are subject to salary caps which are set annually. The salary cap for 2018 is $163,992.

Service

The service we use in the formula is your pensionable service in PSPP, to a maximum of 35 years.

If you work part-time, your pensionable service earned per year is based on the hours worked in that year (ignoring anything that is considered overtime), divided by the regular full-time hours for that position.

Example of the Formula


The two totals are added together to give you an estimated annual unreduced pension.

The final amount of your pension is based on your age when you retire, the pension option you choose at retirement, and if you choose to coordinate your pension.


You can find examples of the pension formula, completed with sample member data, here:

A member has a highest average salary of $64,000 and has worked full-time for 25 years.

Here is how that information works in the pension formula:

A full-time member is normally expected to earn one year of service per calendar year. A member working part-time will earn less service based on the percentage of full-time hours he or she works.

If you work partā€time for a PSPP employer, your service and salary are still components of your pension formula, but you will not build up your pensionable service as fast as working full-time.

Service

For this example, Leanne works part-time and her hours worked are 80% of the hours worked by someone who is full-time (sometimes called a 0.8 position). That means she works 80% of what a full-time employee would, so over 25 years of working she will earn 20 years of pensionable service.

Salary

For this example, Leanne's salary in a part-time (0.8) position is $48,000.

The pension calculation is based on what Leanne's salary would be if she worked full-time. This is what we call her annualized salary. If Leanne had worked full-time over the same period, her highest average salary would have been $60,000 per year. You can see an example of how this is calculated below.


 

Here is how that information works in the pension formula: