Your pension benefit calculation is a pre-determined formula that is based on:
Your pensionable service:
- the number of years you have earned (accrued).
- is equal to the number of years you worked and made pension contributions; unless you worked part-time, in which case it would be pro-rated accordingly. For example, if you worked 10 years at 50% part-time, your pensionable service would be 5 years.
- The maximum service credited for pension purposes is 35 years.
- Your 5-year highest average salary (HAS). This is your average annual salary for the five years of your career during which your salary was at its highest.
- The average Year’s Maximum Pensionable Earnings (avg. YMPE) - see definition below.
Note: We use the avg. YMPE based on the same time period as your HAS.
Your pension benefit is made up of two components, your lifetime pension and your bridge benefit.
Your lifetime pension is calculated at 1.3% of your highest average salary (best 5 years) and is payable from the date you started receiving your pension until death. If your highest average salary is greater than the average YMPE, the portion of your salary above the YMPE is calculated at 2.0%.
Your bridge benefit is calculated at 0.7% of your highest average salary* (best 5 years) and is payable from the date you started receiving your pension until age 65. Up to the average YMPE
IMPORTANT! The bridge benefit component of your pension benefit is only payable until age 65. It is designed to supplement your income until unreduced benefits are payable from CPP at age 65. If you retire before age 65 and decide to begin receiving a reduced CPP benefit, you will still receive the bridge benefit until age 65.
Pension benefit calculation example (if a member’s salary is above the YMPE):
Chris is retiring at age 58 with 32 years of pensionable service. His 5-year highest average salary (HAS) is $75,000 and the avg. YMPE is $56,440.
Pension benefit calculation example (if a member’s salary is below the YMPE):
Kim is retiring at age 55 with 30 years of pensionable service. Her 5-year highest average salary (HAS) is $51,000 and the avg. YMPE is $56,440.
What is the YMPE?
The YMPE is an important term to understand when it comes to calculating your pension contributions.
- It is a figure established by the CRA each year.
- It is used as the ceiling for contributions to the Canada Pension Plan (CPP).
- It changes every year, on January 1st, to reflect increases in the average wage.