Retiring from a pension fund
When you retire at your normal retirement age of 63, you can choose to buy a pension (annuity) in your name from a registered insurer. Using your fund credit, you can also choose to get your pension from the fund as a living annuity. If you buy a pension with your fund credit (from a registered insurer or the fund), you won’t pay lump sum tax on it. However, the monthly pension payments will be subject to income tax.
Refer to the fund’s “Options on Retirement” brochure (under than materials tab) for more details about all of your annuity options at retirement.
You can choose to take up to one-third of your fund credit as a cash lump sum. If you take one-third as cash you’ll have to pay tax on it. A portion of your cash lump sum will be tax free.
Refer to the “Taxation of Fund Benefits” booklet for more information on how your retirement benefit will be taxed when you retire.
The balance of your fund credit must be used to buy a pension. The insurance company or the fund will pay you a monthly income for your retirement years, depending on the type of pension you choose. Your fund credit is equal to:
- All the company’s contributions made on your behalf, towards your retirement benefits
- Your contributions towards retirement benefits
- Any amounts transferred into the fund from a previous fund
- Any interest earned on these amounts.
Definitions
Interest or investment returns: The contributions made on your behalf towards your retirement savings are invested by the fund. The total contributions towards retirement plus the fund’s investment returns or interest make up the total assets of the fund. The higher the investment growth achieved, the higher the benefits you’ll get from the fund. However, there is always the risk that the markets won’t be stable. If this happens, your fund credit could decrease. The fund’s interest is calculated daily, based on the performance of its investments. This is added to your fund credit each day. The trustees will tell you how much interest has been added to your fund credit in your benefit statements (issued twice a year). You can also see your fund information and values online.
Normal retirement age: 63 or as indicated in your employment contract.
Normal retirement date: This is the day you would normally retire and is the first day of the month following your normal retirement age.
You can retire early but your savings will be less
You can retire early from age 55. If you decide to take early retirement you must give the municipality written notice. Early retirement works the same as normal retirement. It’s important to remember that if you choose to retire early, you’ll have less money saved than if you retire on your normal retirement date. Your money will have had less time to grow and you’ll have paid in fewer contributions. Make sure you have saved enough money before deciding to retire early.
The following is a rough guide of how much money you’ll need when
you retire to retire comfortably:
| Retirement Age | Multiple of your salary |
|---|---|
| 55 | 18.7 x annual salary |
| 60 | 17.0 x annual salary |
| 63 | 16.0 x annual salary |
| 65 | 15.2 x annual salary |
Each year, the fund will give you a projection statement that tells you how you’re progressing towards your retirement so you can see if you’re on track for a comfortable retirement.
The projection statement will also tell you how much extra you need to contribute to the fund if you’re behind target.
You can retire early if you are too sick to work
If you become too sick to carry on working you may become eligible to retire early because of ill health, even if you’re younger than age 55. A disability benefit will also be payable to you.
You can retire late with more savings
You can, with the municipality’s permission, work after your normal retirement date, but no later than age 65. The municipality will still contribute to the fund on your behalf. Late retirement works the same as normal retirement except that you should have more money when you retire because you would have saved for longer and paid more contributions into the fund.
Invest your money wisely
Once your fund credit has been paid to you as cash or to an insurer as a pension (annuity), you won’t receive any more benefits from the fund. This is why it’s so important for you to invest your fund credit wisely.