Frequently Asked Questions on RCMP Pensions
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, 2011, the diversified investment portfolio held in the new RCMP Pension Fund consisted of:
This portfolio earned a 14.5 % return for the latest fiscal year ending March 31, 2011, compared with a 21.51 % gain in the previous year as reported in the latest PSPIB annual report. The Pension Fund has earned an annualized return of 4.90 % over the last five years, ending March 31, 2011.
PSPIB received net RCMP employee and employer contributions of $341 million during fiscal 2010 and invested these funds into the RCMP pension fund as received. Assets in the RCMP pension fund managed by the PSPIB totalled $4.106 billion as of March 31, 2011.
Contributions made prior to April 1, 2000 remain in the old (Superannuation) account and were credited with interest of $833.4 million during the same fiscal year representing an annual return of 7.3 % for the period ending March 31, 2008, the latest year for which there is an actuarial report for the plan provided by the Office of the Superintendent of Financial Institutions Canada. The balance in the old (Superannuation) account was $11.99 Billion as of March 31, 2008.
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:
The PSPIB Report for 2011 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:
Notice that the bridge benefit paid up to age 65 is replaced by the CPP/QPP benefit.
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 in 2011 current contributors to the RCMP pension plan do so at a reduced rate of 5.8 % on salary up to the maximum CPP/QPP contribution limit of $48,300. Secondly, it means that your pension benefit under the RCMP pension plan will also be reduced by a standard formula at age 65 when you become eligible to draw CPP/QPP retirement benefits 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 after 1965 and on the average maximum pensionable earnings (AMPE) under the CPP or the QPP for the year of retirement, If the average of your pensionable earnings was below the AMPE amount, this lower average will be used to calculate the reduction.
Changes to the CPP reduction formula were approved by Treasury Board Ministers in June 2006. The basic formula for calculating the CPP reduction is changing and is being phased in for Members who turn age 65 after December 31, 2007. Retired Members turning age 65 after 2011, will use the following example with reduction factor .00625. Retired Members turning age 65 in 2010 and 2011 would substitute the reduction factors of .00655 or .00640 respectively, in the following example:
.00625 X number of years of pensionable RCMP pensionable service after 1965 X the lower of:
The 2010 AMPE for the CPP or QPP which can be used to reduce a RCMP pension for a Member retiring in 2010 is $44,840.
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 can obtain information about your pension benefits as well as medical and dental insurance plans on the RCMP Pension & Benefits web site at http://www.rcmp.pension.gc.ca or by calling toll-free at 1 800-661-7595.
8) How much does the RCMP contribute to my pension plan compared to my contributions?
Effective January 1, 2011, current contributors to the RCMP pension plan are required to contribute 5.8% of pensionable earnings up to the Canada Pension Plan yearly maximum pensionable earnings (YMPE) and 8.4% 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 2011, the RCMP will contribute approximately $267 million compared to total employee contributions of $125 million, as estimated in the latest actuarial report, dated March 31, 2008. In other words, the employer is contributing approximately 68 % of the current service costs of the pension plan.
(5.8% x $48,300 + 8.4% x ($75,000—$48,300) = $5,044 or 6.725 % 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 2011, the Normal Plan costs were estimated to be 20.85% of pensionable payroll and therefore the RCMP, as the employer, would contribute the remaining 14.125 % of pensionable earnings or $10,594 towards the cost of pension benefits for a Member earning $75,000.