Two or More Years of Service

If you have two or more years of PSPP service (including CPS or service you've purchased or transferred) you are entitled to a lifetime PSPP pension at retirement. This is what it means to say you are "vested".

If you leave the Plan, we will send you a Termination Statement with your options on what to do with your benefits. You will have 90 days to make a decision and let us know. If you do not, your funds will be left with PSPP until you decide what you would like to do with them.

Your options will include leaving your benefit in the Plan to receive a monthly pension when you retire and may include an option to take your benefit as a lump-sum payout. Note that some types of buyback and transferred service do count for vesting towards your pension, but not towards a lump sum payout.  More details on this.

You can request a new Termination Statement later as long as you have not rejoined PSPP.

The options available to you depend on your age when you leave the Plan:

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 10%
Over $5,000, up to $15,000 20%
More than $15,000 30%

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.

Time Sensitive Considerations

Leaves of Absence

You have 30 days from the date you leave the Plan to apply to purchase a leave of absence. If you are already paying for a leave of absence, you have 90 days from the date you leave the Plan to complete that purchase.

Prior Service Purchases

If you intend to buy prior service, you must submit your application before you leave the Plan. If you are already making prior service payments, you will have 90 days to complete your buyback purchase.

In either scenario, if you do not complete your purchase it will be prorated—only the amount of service you have paid for will be credited.

Combined Pensionable Service (CPS) can impact buybacks in these situations as well.