Royal Canadian Mounted Police
Veterans Association

Frequently Asked Questions on RCMP Pensions

Please note this FAQ section is provided for information purposes only and does not constitute a legal statement of your pension rights and obligations. Should there be any conflict between the information in this document and that contained in the RCMPSA, related Regulations or other applicable laws, the legislative provisions will prevail.

1) Are our RCMP Pensions affected by continued volatility of the major stock market indices?

RCMPSA Pensions Secure

Despite continued market volatility with major stock market indices, RCMPSA pensions remain secure. As you know our Pension Plan is a defined benefit plan with the pension received determined on a benefit formula based on a member’s years of service and best five-year salary average. Our pension benefits are guaranteed and are unaffected by short term volatility in the markets. RCMPSA pensions are paid from two accounts, and pro-rated based on the number of years we contributed to RCMPSA prior to and after April 1, 2000. For simplicity, we can refer to these as the old (Superannuation) account and the new (Pension Fund) account.

Our funds in the new RCMP (Pension Fund) account have been invested by the PSPIB (Public Sector Pension Investment Board) since April 1, 2000. PSPIB invests funds for a long term horizon with the objective of achieving maximum investment returns without undue risk of loss. As of March 31, 2005, the diversified investment portfolio held in the new RCMP Pension Fund consisted of:

• 40.1% Canadian Equities
• 27.2% Foreign Equities
• 26.6% Canadian Bonds
• 1.1% Real Return Bonds
• 2.2% Real Estate, and
• 2.3% Cash.

This portfolio earned a 7.9 % return for the latest fiscal year ending March 31, 2005, compared with a 26.1 % gain in the previous year as reported in the latest PSPIB annual report. The Pension Fund has earned an annualized return of 3.0 % over the last five years, since April 1, 2000.

PSPIB received net RCMP employee and employer contributions of $270 million during fiscal 2005 and invested these funds into the RCMP pension fund as received. Assets in the RCMP pension fund managed by the PSPIB totaled $1.424 billion at the end of fiscal 2005.

Contributions made prior to April 1, 2000 remain in the old (Superannuation) account and were credited with interest of $829.5 million during the same fiscal year representing an annual return of 7.8 % for the same period ending March 31, 2005. The balance in the old (Superannuation) account was $10.89 Billion as of March 31, 2005.

The RCMP Pension Plan is reviewed every three years by the Office of Superintendent of Financial Institutions to ensure that the Plan meets its’ actuarial obligations to provide future pension benefits to pensioners. The latest Actuarial Report can be viewed at:

http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?DetailID=506

The PSPIB Report for 2005 can be viewed on their website at www.investpsp.ca .

2) What is my basic pension benefit under the RCMPSA?

The RCMPSA is a defined benefit plan that provides a lifetime pension to eligible contributors, based on a Member’s category of employee, years of service, average salary level, and age at retirement. The RCMPSA provides 2 % pension benefit integrated with CPP/QPP benefits, so the basic pension benefit may be described as is:

• 1) Prior to age 65, a 2 % benefit consisting of:
  • a) 1.3 % x (lesser of (HAS) or AMPE) x # Years of Pensionable Service, plus, a bridge benefit of
  • b) 0.7 % x (lesser of (HAS) or AMPE) x # Years of Pensionable Service payable to age 65, plus
  • c) 2.0 % x (HAS) above AMPE x # Years of Pensionable Service
    
    
• 2) From age 65 onward, an integrated benefit consisting of:
  • a) 1.3% x (lesser of (HAS) or AMPE) x # Years of Pensionable Service, plus,
  • b) 2.0% x (HAS) above AMPE x # Years of Pensionable Service plus, a CPP/QPP benefit, payable from the Government of Canada/Quebec

Notice that the bridge benefit paid up to age 65 is replaced by the CPP/QPP benefit.

• (HAS) is the Highest or Best 5 Year Consecutive Average Salary
• AMPE is the five year average of the YMPE (Yearly Maximal Pensionable Earnings) or the salary limit for CCP/QPP contributions in the year of retirement and the four previous years

3) Why does my RCMPSA pension reduce at age 65?

The RCMP pension plan is integrated with the Canada and Quebec pension plans (CPP/QPP). Integration affects both contributions and benefits. When the CPP and QPP came into effect on January 1, 1966, the federal government, like most Canadian employers offering a pension plan for their employees, decided to integrate contribution rates under the new CPP/QPP with federal employee pension plans, including the RCMPSA. It did so rather than having employees pay full CPP/QPP contributions in addition to full RCMPSA contributions .

This means, firstly, that you contribute to your RCMP pension plan at a reduced rate of 4 % on your salary up to the maximum covered by CPP/QPP of $41,100 in 2005. Secondly, it means that your pension benefit under the RCMP pension plan will also be reduced by a standard formula when you become eligible to draw CPP/QPP benefits at age 65 or when you begin to draw CPP/QPP disability benefits at any age.

4) How is the CPP/QPP integration reduction calculated?

The reduction in your RCMP pension is based on the number of years of pensionable service to your credit under the RCMP pension plan and on the average maximum pensionable earnings (AMPE) under the CPP or the QPP, YMPE for the year of your retirement and the four preceding years. If the average of your pensionable earnings for the same years was below that amount, this lower average will be used to calculate the reduction.

The formula for calculating the reduction is as follows:

.007 X number of years of pensionable RCMP pensionable service X the lower of:

• the AMPE under the CPP/QPP for the 5 years preceding your retirement, or
• the average of your pensionable earnings for the same period

The 2005 AMPE for the CPP or QPP which can be used to reduce a RCMP pension for a Member retiring in 2005 is $39,780. Example:

• If you retire on December 31, 2005, with pensionable service extending back to January 1, 1971 (35 years), and a final average salary above the AMPE, the reduction to your RCMP pension at age 65 will be approximately:
• .007 X 35 X $39,780 = $9746.10 per annum or $812.18 per month.

If your average salary was lower than the AMPE, your actual average salary would be used in the calculation.

5) Does the age at which I choose to receive CPP/QPP retirement benefits effect the reduction of my RCMP pension?

No, you may choose to receive CPP/QPP retirement pension benefits between the ages of 60 to 70. This will not effect the amount of the reduction to your RCMP pension, or the effective date. Your RCMP pension will still be reduced at age 65. If however your receive CPP/QPP disability pension benefits, your RCMP pension is reduced immediately, regardless of age.

6) Will the CPP/QPP retirement pension be the same as the reduction to my RCMP pension?

That is impossible to predict. The CPP/QPP retirement pension payable at age 65 may be more or less than the reduction of your RCMP pension since the plan design provisions of each plan are different and the amount of a benefit is calculated independently under each plan. For example, the maximum contributory period, the age of eligibility for benefits, and the method of calculating average earnings are different under the two plans.

Under CPP/QPP provisions, you may choose to receive a reduced CPP/QPP retirement benefit as early as age 60. While you may receive this reduced CPP/QPP pension up to five years before your RCMP pension is reduced at age 65, please note that there is no change in the size of reduction to your RCMP pension.

7) Where can I obtain more information on my RCMP pension benefits?

You obtain information on your future RCMP pension benefits on the RCMP Pension & Benefits web site at www.pbs-sra.ca or by calling 1800-661-7595.

8) How much does the RCMP contribute to my pension plan compared to my contributions?

Effective January 1, 2000 to December 31, 2005, your required contribution rate is 4% of pensionable earnings up to the Canada Pension Plan yearly maximum pensionable earnings (YMPE) and 7.5% of any pensionable earnings in excess of the YMPE.

The RCMP, as employer, is required to contribute the balance of the Normal Plan costs for each contributing Member for the year. In the last year ending March 31 2005, the RCMP contributed a total of $208,897,200 compared to total employee contributions of $71,318,300. In other words the employer is contributing approximately 75% of the cost of the pension plan.

For example:
A member has pensionable earnings of $65,000 in 2005. The YMPE for 2005 is $41,100. The employee contributions under the RCMPSA in 2005 would therefore be $3,436.50, (4% x $41,100 + 7.5% x ($65,000—$41,100) = $3,436.50 or 5.29 % of salary.)

The Office of the Superintendent of Financial Institution does actuarial calculations each year to determine how much the RCMP, as employer, is required to contribute. In 2005, the Normal Plan costs were estimated to be 20.22% of pensionable payroll and therefore the RCMP, as the employer, would have contributed the remaining 14.93 % of pensionable earnings or $9,706.50 towards the cost of pension benefits for the Member earning $65,000.

Bob Slipp
RCMP PAC Committee Support
(613) 993-4709