You have a number of options to consider when you retire. Although the value of your pension will be the same in all cases, the option you select could affect the amount of the monthly benefit you receive. You should bear this important point in mind when considering your options.
The normal form of pension payable under the Plan is what is known as a Life Refunding pension. If you do not have a spouse when you retire, you will receive a regular monthly pension payable for the remainder of your lifetime.
Payments will cease when you die. In no case, however, will the pension payments you received from the Plan during your lifetime be less than the amount you contributed to the Plan, plus interest. The refund, if any, will be paid to your beneficiary.
If you have a legal spouse when you retire, things get a little more interesting. Under current legislation, your surviving spouse is entitled to a pension that continues at least 66.67% of the monthly payments you received from the Plan. This benefit is payable for the remainder of your spouse’s life.
In addition, the pension your surviving spouse receives will be adjusted each year by 2/3 of the cost of living increase you would have received through the Plan.
You should note that this survivor option will provide you with a lower monthly pension than the normal form outlined above. This reduction simply accounts for the longer anticipated payment period. The spousal pension, after all, will now be paid out for the remainder of two lifetimes, not just one.
If you and your spouse do not want this option (or you wish to reduce the size of the benefit to be continued to your spouse), both of you must sign an official waiver form. Once payments begin, this waiver cannot be reversed. As such, we recommend that both you and your spouse seek independent financial advice before making your decision.
Guaranteed Payment Option
Instead of the life refunding pension provided under the normal form, you can elect a form of pension that provides a guaranteed payment period of 10 years (120 monthly payments). In other words, if you die before receiving all 120 payments guaranteed under this option, the remaining monthly installments will be made to your beneficiary or estate.
If you retire prior to age 60, you may elect to integrate your MTS Pension with the Canada Pension Plan (CPP) and/or the Old Age Security Plan (OASP).
The purpose of the integration is to provide relatively uniform income throughout retirement. Integration provides an amount, or advance in addition to your MTS Pension, until you reach age 65 (when OAS is currently payable), or at age 60 (when CPP may become payable). At this time we reduce your pension to recover the advances given. This reduction continues for the rest of your life. Due to potential program changes in the Federal Benefits, caution should be taken when considering integration with OAS.
These options will be described to you in detail prior to your retirement. Keep in mind that you can’t change your selection after your retirement date.