At retirement, you must choose a pension option. The pension option you choose will affect the amount of your monthly pension.
Each pension option provides a different death benefit. The greater the death benefit, the smaller your monthly pension will be.
The monthly pension with its associated survivor benefits (Single Life, 5-Year Guarantee), is often referred to as the “normal form” of pension. The normal form of pension is payable monthly for as long as you live, but also includes a guarantee that if you die before you have received 60 monthly payments (five years of payments), the remainder of the 60 payments will be paid to your beneficiary or estate.
Seven Pension Options
Factors are applied to the normal form of pension to determine the pension amounts for the other pension options. Although the monthly pension amounts for the other pension options are different, they have the same value as the pension payable in the normal form.
There are seven pension options: four “Single Life” pensions and three “Joint and Survivor” pensions.
Single Life Pensions
Single life pensions are payable for your lifetime or to the end of the guarantee period, whichever is longer. The guarantee period starts from the effective date of the pension.
If you die before the end of the guarantee period chosen, the pension will continue in the same amount to your named beneficiary(ies) or estate until the end of the guarantee period. You may change beneficiaries at any time until the end of the guarantee period.
You may choose:
- Single Life, No Guarantee (payments stop on your death regardless of the number of payments made)
- Single Life, 5-Year Guarantee
- Single Life, 10-Year Guarantee
- Single Life, 15-Year Guarantee
Joint and Survivor Pensions
Joint and Survivor pensions are calculated on the basis of two lifetimes – yours and a nominee’s. The nominee cannot be changed after the pension has started. If the nominee is your spouse/pension partner, a pension is paid for your lifetime and your spouse/pension partner's lifetime. If the nominee is a dependant under the tax rules, a pension is paid for your lifetime and, after your death, only for as long as the nominee remains a dependant.
All Joint and Survivor pensions have a five-year guarantee period. If both you and your nominee die before receiving 60 monthly payments, the remainder of the 60 payments will be paid to your beneficiary or estate.
You may choose:
- Joint Equal
If your nominee dies first, the pension payments stay the same and continue to you for your lifetime. If you die first, the payments stay the same and continue to your nominee.
- Joint Reducible by One-Third
If your nominee dies first, the pension payments reduce by one-third so that two-thirds of the pension continues to you for your lifetime. If you die first, two-thirds of the pension continues to your nominee.
- Joint 100/60
If your nominee dies first, the pension payments stay the same and continue to you for your lifetime. If you die first, 60% of the pension continues to your nominee.
If You Have a Spouse/Pension Partner
If you have a spouse/pension partner at retirement, you must choose one of the Joint and Survivor pension options. Your spouse/pension partner can waive the right to the Joint and Survivor pension by completing a statutory declaration. The waiver cannot be signed more than 90 days before the effective date of your pension. If your spouse/pension partner waives the right to the pension, you can name a dependant as your nominee or choose one of the Single Life pension options.
If You Don’t Have a Spouse/Pension Partner
If you don’t have a spouse/pension partner, you must choose a Single Life pension option or choose a Joint and Survivor pension option and name a dependant as a nominee.
Choosing a Pension Option
Only you can decide which pension option is right for you. You should consider factors such as your:
- age and your spouse/pension partner's age,
- family and financial situation,
- income needs and future lifestyle plans in retirement,
- other sources of income, and
- dependants' needs (if applicable).
When you apply for your pension, you will be given information about the amounts payable under each available pension option. You choose a pension option by completing a Pension Election form.
The Most Commonly Selected Pension Options
This chart shows the percentage of the retired teachers who selected each of the seven pension options in the 2015 calendar year and the average over the last 10 calendar years.
|Single Life - No Guarantee|| 10%|| 7%|
|Single Life, 5-Year Guarantee|| 7%|| 8%|
|Single Life, 10-Year Guarantee|| 5%|| 5%|
|Single Life, 15-Year Guarantee|| 9%||11%|
|Joint Reducible by One-Third|| 7%|| 5%|
The most commonly selected pension option is not necessarily the best option for you. Each person is unique, so you should not make a decision based on the average statistical numbers.
When selecting a pension option, you should consider some key questions: What are my current and future financial needs? Does my spouse/pension partner have a pension? Do I have dependants to support? Do I have other sources of income and when are they accessible? How is my health and, if applicable, my spouse’s/pension partner’s health, and how is this likely to affect my longevity and that of my spouse/pension partner?
Default Pension Option
If you do not choose a pension option within 60 days after the pension option information has been sent to you, you will receive the default pension option, which is:
- Single Life, 5-Year Guarantee, if you have no spouse/pension partner, or
- Joint 100/60, 5-Year Guarantee, if you have a spouse/pension partner.
If you don’t want the default pension option, you can withdraw your pension application, in writing, within the 60 days, and reapply for a pension at a later date. The pension will be retroactive to the first eligible date.