Glossary of Terms

85 Factor

If your total years of pensionable service and age at retirement added together equal at least 85, then you are entitled to an unreduced PSPP pension as early as your 55th birthday.

Actuarial Valuation

A mathematical analysis of the financial condition of a pension plan. The valuation shows if the contribution rates are higher or lower than what is needed for the long-term funding of the Plan.
An actuarial valuation must be completed at least once every three years, but on the direction of the PSP Board, the actuary may prepare an actuarial valuation more frequently.

Adult Interdependent Partners

Two people are adult interdependent partners if they live together in a relationship of interdependence:

  • For a continuous period of at least 3 years,
  • of some permanence (and less than 3 years) if the couple has a child, or
  • have entered into an adult interdependent partner agreement

A relationship of interdependence is when two people are not married to one another but still:

  • share one another’s lives
  • are emotionally committed to one another; and
  • function as an economic and domestic unit

Annualized Salary

This is used in determining the highest average salary for calculating the pension for a person who has worked part-time. The annualized salary is the amount a person would have earned if he or she worked full-time over the same period.

If you work part-time, you can calculate your own annualized salary by dividing your annual part-time pensionable earnings by your full-time equivalency (FTE).

For example, if you earned an average of $45,000 per year in a 0.6 position:

$45,000 (Yearly Part-Time Salary)
÷ 0.6 (FTE)
= $75,000 (Annualized Salary)

Annuity

A financial product that provides income to be paid at regular times or for a set period of time, usually for a person’s life. An annuity is often used as guaranteed retirement income.

Beneficiary(ies)

If you have a pension partner, that person automatically receives any PSPP benefits if you pass away, unless he or she has given up these rights by completing a waiver.

A beneficiary is someone you designate to receive a benefit in the event of your death and can be one or more people, or even a charitable organization.

Break in Service

A break in service occurs when you are a PSPP member and you either change positions or move to a different PSPP employer and:

  • there is a break between your last day in your old position/with your old employer and the first day in your new position/with your new employer, and
  • you would have normally been scheduled to work during that break.

Buyback

A buyback is used to increase your pensionable service in PSPP by buying eligible service.

Such service may include:

  • leaves of absence and parental leave; and
  • prior periods where you were participating in a Canadian pension plan.

Buyback Election

A Buyback Election is a form within the Buyback Proposal you receive. It tells us the choice you have made regarding your buyback.

COLA

The cost of living adjustment (COLA) is a benefit of your pension plan that is designed to compensate for inflation. Every year, COLA is calculated and applied to pension payments. After retirement, the amount of the increase will be shown on your Pensioner Annual Statement. For information about COLA, please read more about it on your Plan website.

Commuted Value

The present value of a PSPP member’s future pension. It is the money that would have to be invested today, based on interest, mortality, and other assumptions, to generate a future PSPP lifetime pension.

The assumptions used in the calculation of a commuted value are calculated based on the assumptions used in the funding of the Plan.

Contributions

Money paid into a pension plan by you and your employer. Your regular contributions are made through payroll deductions and are tax deductible. All contributions go directly to the PSPP fund.

Defined Benefit (DB) Pension Plan

A DB pension plan provides a member with a set (defined) monthly pension for his or her lifetime once the member retires. The formula used to calculate a member’s pension benefit includes the member’s salary and years of service. The pension is not affected by how much the member contributes or the returns on pension fund investments. PSPP is a DB pension plan.

Excess Contributions

When a member retires, leaves the Plan or passes away before retirement, the commuted value of the member’s pension is calculated and compared with the member’s accumulated contributions with interest. If a member’s contributions with interest exceed the commuted value of the member’s pension, the excess contributions are refunded to the member.

Highest Average Salary (HAS)

Normally, this is the average of your five highest consecutive years of salary used to calculate your pension benefits, taken from the employment information reported by your employer(s). If you have periods of part-time employment being considered in determining your HAS, the annualized salary will be used.

For the purposes of calculating your highest average salary, the salary for a given year may not exceed the corresponding salary cap.

Independent Financial Advisor

An independent financial advisor, often working under the “fee for service model”, provides a way for Canadians to get unbiased, non-conflicted advice on their retirement, estate, tax and other financial planning needs.

Locked-In Retirement Account (LIRA)

A special type of RRSP designed specifically to only hold locked-in pension funds.

Most financial institutions offer LIRAs; however, any locked-in funds transferred from the PSPP may only be sent to a financial institution that appears on the Alberta Superintendent’s List of Financial Institutions Offering Locked-In Pension Products.

Partial Disability Pension

A partial disability pension is paid when medical evidence indicates that a member is not capable of performing the regular duties of his or her job.

A partial disability pension is reduced for early retirement. This means that it will be reduced for each year you retire before age 65, or before your age and years of service add up to 85 points – whichever would result in the smallest reduction.

Pensionable Salary

You may receive money which is in addition to your regular pay, however not everything you see on your T4 statement is considered to be pensionable salary.

Pensionable salary might include:

  • Pay for shift work
  • Pay for weekends
  • Pay for being in an ‘acting’ role
  • The value of a vehicle provided for personal use

There are some types of pay that are not pensionable, though:

  • Variable pay (such as bonuses)
  • Overtime pay
  • Expense claims

If you have questions about whether a type of pay is considered pensionable or not, you may want to ask your employer as it will vary based on employer policy.

Pensionable Service

The number of years you contribute to the Plan plus:

  • any service you have transferred into the Plan, and
  • prior service or periods of leave you have purchased.

For part-time members, pensionable service 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.

The maximum amount of pensionable service a member can earn in PSPP is 35 years.

Prorated Service

In the case of buybacks, when the purchase of service is not completed according to the payment schedule, only pensionable service that is paid for is credited to the member.

Registered Retirement Savings Plan (RRSP)

A savings plan introduced by the Federal Government to encourage Canadians to save money for retirement. Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in that plan.

Salary Cap

The maximum salary set by the Plan rules, in order to ensure your benefit does not exceed the Income Tax Act defined benefit limit.

The 2025 salary cap is $209,223.50.

Separate and Apart

People are living separate and apart:

  • if they are living apart and either of them has the intention to live separate and apart from the other, or
  • if, before the relevant time,
    • they had been living separate and apart for any period, and
    • that period was interrupted or ended by reason only that either of them could not continue to live separate and apart,

and the separation would probably have continued if that person had not become so incapable.

Total Disability Pension

A total disability pension is paid when you suffer from a physical or mental impairment that can be reasonably expected to last for the rest of your lifetime and prevents you from being employed.

This is paid as an unreduced monthly pension and is calculated based on how many years of service you have in PSPP. This means your pension will not be reduced according to how many years you are before age 65, or whether your age and years of PSPP service add up to 85.

Unreduced Pension

A pension that will not be reduced in the event of early retirement.

65 is considered the ‘normal’ retirement age for PSPP. You can start receiving your pension as early as age 55 and still receive an unreduced pension if your age at retirement plus your years of service equals 85 points. This is called the 85 factor.

Vested/Vesting

When you qualify to receive a monthly PSPP pension. This happens when you have two or more years of PSPP service. Members of PSPP are vested immediately if they are contributing into the Plan on or after their 65th birthday.

Year’s Maximum Pensionable Earnings (YMPE)

A figure set each year by the Government of Canada that represents the maximum salary on which contributions can be made to the Canada Pension Plan (CPP). The YMPE is also used in calculating your PSPP contributions and benefits.

PSPP is an integrated pension plan that is designed to work with the CPP. This means that the amount of PSPP contributions you pay on salary up to the YMPE and the PSPP pension you earn on pensionable salary up to the YMPE are lower to take into account that you are also contributing to and will be receiving a benefit from CPP.