When you retire, you will need to choose a pension payment option. This decision will have an impact on the amount of your monthly pension and how much your spouse or beneficiary may receive after your death. The available options depend on whether you have a spouse when you start your pension. Who is your spouse? Click here to find out.
If you have a spouse when you retire, you must choose a payment option that provides a lifetime pension to your spouse should you die first. Your spouse’s pension must be equal to at least 60% of your pension, but you can increase it to 75% or 100% if you wish. Your monthly pension will be reduced because it must be paid for two lifetimes. The amount of the reduction will depend on your age and the age of your spouse.
The following table list the different pension payment options available to you – and the impact they might have on your monthly income. These examples assume you have a monthly pension of $500 and you and your spouse are both age 65. Remember that your actual monthly pension will be based on the benefit you have accrued (any past service pension plus current service pension) and your age and your spouse’s age at retirement.
| If You Have A Spouse | |||
| Pension Payment Option | Description | Paid To You Each Month | Paid To Your Spouse Each Month After Your Death |
|---|---|---|---|
| 60% Joint and Survivor Pension | Pension paid for your lifetime with 60% continuing to your spouse for his or her lifetime after your death. | $475 | $285 |
| 75% Joint and Survivor Pension | Pension paid for your lifetime with 75% continuing to your spouse for his or her lifetime after your death. | $469 | $352 |
| 100% Joint and Survivor Pension | Pension paid for your lifetime with 100% continuing to your spouse for his or her lifetime after your death. | $458 | $458 |
| 50% Joint and Survivor Pension (with a signed waiver) | Pension paid for your lifetime with 50% continuing to your spouse for his or her lifetime after your death. | $480 | $240 |
If your spouse doesn’t need a pension, your spouse can give up this entitlement if both of you sign a waiver and provide it to InBenefits before your pension starts to be paid. If a waiver is provided, you can choose one of the other payment options.
If you do not have a spouse when your pension starts or your spouse has waived entitlement to a spousal pension, you have a variety of pension options available.
The following table list the different pension payment options available to you – and the impact they might have on your monthly income. These examples assume you have a monthly pension of $500. Remember that your actual monthly pension will be based on the benefit you have accrued (any past service pension plus current service pension) and your age at retirement.
| If You Don’t Have A Spouse (Or You And Your Spouse Waive Pension) | ||
| Pension Payment Option | Description | Paid To You Each Month |
|---|---|---|
| Life Pension with a minimum of 60 monthly payments | Pension paid for your life. If you die before receiving 60 monthly payments, your beneficiary or estate will receive the current value of the outstanding payments and no further benefits will be paid from the Plan. | $500 |
| Life Pension with a minimum of 120 monthly payments | Pension paid for your life. If you die before receiving 120 monthly payments, your beneficiary or estate will receive the current value of the outstanding payments and no further benefits will be paid from the Plan. | $492 |
| Life Pension with a minimum of 180 monthly payments | Pension paid for your life. If you die before receiving 180 monthly payments, your beneficiary or estate will receive the current value of the outstanding payments and no further benefits will be paid from the Plan. | $479 |
| Life Pension (no minimum term) | Pension paid for your lifetime only. Monthly payments will stop when you die and no further benefits will be paid from the Plan. | $504 |
It’s your responsibility to apply for your government benefits (Canada Pension Plan and Old Age Security). You should apply for these at least six months before you want these government benefits to begin.
To begin your monthly pension, please contact InBenefits approximately three months before the date you want your pension to start. InBenefits will confirm your mailing address and send you an application package that includes a statement of your estimated pension for each of the pension payment options. This information will be helpful when you choose your pension payment option.
Income tax will be deducted from your pension payments. The amount that is deducted is based on your estimated income. When you file your income tax return, you will see how accurately your income has been estimated.
- 1. If you have to pay a lot of tax when you file your return, your income has been underestimated and you may want to have more tax deducted from future monthly pension payments. If you decide there is too little tax being deducted, you can increase the amount being deducted (within limits) at the end of the year by contacting InBenefits.
- 2. If, on the other hand, you find you are receiving a large tax refund each year, your income is being overestimated, and InBenefits may be deducting too much In this case, you may ask InBenefits to reduce the amount of tax being deducted, (within limits).
You can split up to 50% of your pension income with your spouse. This means that your spouse can report up to half of your pension as his or her income on his or her tax return.
Pension income splitting doesn’t affect how or to whom your pension income is paid. It’s simply a way for you to reduce the amount of income tax you must pay. All you need to do is submit Form T1032, Joint Election to Split Pension Income, available from the Canada Revenue Agency, and complete an additional line on both your own and your spouse’s tax returns.
If you are thinking about changing the amount of tax deducted from your pension or splitting your pension income, we recommend that you first speak with an accountant or qualified financial advisor.
Here are some things to keep in mind before you choose a pension payment option:
- 1. Your full pension will likely be paid to you for the rest of your life.It doesn’t matter which option you choose; you will receive a lifetime pension from the NHRIPP. However, the amount of your monthly pension may be adjusted depending on the financial health of the Plan.
- 2. You can’t change your payment option after you start your pension. It’s extremely important that you understand your options before you make your decision. You will not be able change your payment option once your pension begins to be paid.
- 3. If you have a small pension you do not have a pension payment option. If your normal age 65 pension is less than $100 per month, you will receive the funded portion of your pension benefits as a lump sum payment. A lump sum payment can be taken as a taxable cash payment or can be transferred tax-free to a non-locked-in RRSP.
