The decision to retire is a personal one and will be based on many factors. Planning ahead will make it more likely that you will have the resources you need to do what you want after retirement. Knowing what benefits you will have after you retire is also important.
Your university retirement program is an important part of that planning. Employees enrolled in the University of Waterloo Pension Plan must meet certain criteria to be eligible for pension payments.
Registered pension plans must define a “normal” retirement date that cannot be later than one year after the attainment of age 65, but you are not required to retire when you reach the normal retirement date.
- Normal retirement: The normal retirement date under Waterloo’s pension plan is the first of the month following the month you turn 65. If your birthday is the first of a month, then your 65th birthday is your normal retirement date.
- Early retirement: Retirement is possible as early as age 55. At or after age 55, you may elect early retirement, but your formula pension will be reduced by ½% for each month your early retirement date precedes age 62. For the years between 62 and 65, no early retirement adjustment is applied.
- Late retirement: If you continue working past the age of 65 you must continue contributing to Waterloo’s pension plan and you will continue to accumulate credited service. However your Waterloo pension must begin no later than December 1 of the year you turn 71. This is a legislative requirement. Employees who continue working past the end of the year they turn 71 will receive their Waterloo pension in addition to their salary.
As you plan for your retirement from the University of Waterloo, there are a number of things you need to consider. Once you have decided that you are ready to retire, there are some specific actions required of you.
The following information is not intended to be a sequence of activities nor an exhaustive list of considerations but rather a guide of some key issues; additional personal or department specific considerations might apply to you.
If you are age 55 or older, your termination is considered a retirement regardless of your length of service. You can elect either an immediate or deferred pension. An immediate pension means monthly pension payments will begin on the first of the month immediately following your date of termination. A deferred pension means payment of your monthly pension will commence at later date, but no later than your normal retirement date.
If you are under 62 when the pension payments commence, the pension will be reduced by 1/2% for each month commencement of pension is before age 62.
Please note that if you were under age 55 on your termination date, and you elected a deferred pension, pension payments can commence as early as age 55, however the reduction to your pension is calculated differently; it would be reduced by
- 1/3% per month between age 60 and 65, plus
- ½% per month between age 55 and 60.
If you elect a deferred pension, please ensure that the University is kept informed of your personal email and/or mailing address to ensure you receive your annual pension statement and so we can send your pension benefit statement to put your pension into pay when you attain age 65.
Eligibility for Post-retirement Benefits
- If you elect an immediate pension, you are eligible for post-retirement benefits (which includes extended health, life insurance and tuition benefit) provided you were participating in a UW active employee benefits program (full and/or temporary) for at least ten years immediately prior to the date of your retirement.
- Temporary benefits program includes life insurance and extended health benefits. The full benefits program includes dental, sick leave, and long term disability (LTD) benefits, as well as extended health and options for higher life insurance. Those participating in the full benefits program are also eligible for some policy benefits including tuition (for themselves and eligible children).
- Only extended health, life insurance, and tuition are benefits extended to eligible retirees.
- Your potential date of eligibility for post-retirement benefits might be an important element for you to consider in your retirement planning. We recommend that you contact Human Resources before completing your retirement intention on Workday, for confirmation of eligibility or if you require assistance with understanding or navigating the information in Workday.
- If you decide to retire in advance of achieving eligibility for post-retirement benefits, you may be required to sign an acknowledgement form that clearly indicates that you have made an informed decision.
Discuss your intention to retire with your manager
- Once you have decided to retire, please inform your manager of your intention and the effective date.
- Either you or your manager needs to code your retirement in Workday, Please refer to next section for entering your termination date in Workday.
- Pension payments are deposited into your bank account on the 1st of each month by CIBC Mellon (the University’s pension trustee); as such, your employment ends (i.e. termination date to be entered on Workday) the last day of the month prior to your first month of retirement.
- It is recommended that you provide notice of your retirement in writing (i.e. letter, memo, email). Ensure sufficient notice to enable your manager to recruit for your replacement.
- For Faculty employees, please take any outstanding vacation in advance of your retirement date as there is no cash reimbursement option for unused vacation days.
- For non-unionized Staff employees, indicate to your manager how you would like to use any outstanding vacation time, including any pro-rated accrual in the year of retirement.
- You can choose to use vacation days (i.e. take time off) prior to your retirement date or be reimbursed for unused vacation days in cash, less applicable tax.
- Important note for non-unionized Staff: Please ensure that the agreed upon vacation time that you will take prior to your retirement is submitted and approved by your manager within Workday.
Coding your Resignation in Workday
- Pension payments are deposited into your bank account on the 1st of each month, therefore the last day of the month prior should be coded as your employment end date in Workday, with “retirement” as the reason.
- For non-unionized Staff employees, vacation payout on your last pay, if any, will be automatically calculated based on vacation accrual remaining considering requests for paid time off that have been entered and approved in Workday. Keep in mind that Workday records reflecting your scheduled vacation needs to be completed at least two weeks prior to the date of your final pay deposit.
Contact the Pension Team in Human Resources
- Although the above Resignation process in Workday will inform Human Resources of your intention to retire, please contact the pension team at firstname.lastname@example.org two to three (2-3) months in advance of your retirement. This will enable the pension team to prepare your pension benefit statement.
- Final pension figures cannot be prepared until the beginning of the month immediately prior to your retirement date; however, you can obtain an estimate from myPENSIONinfo.
- Please note, the pension estimates provided on myPENSIONinfo are rounded down. To minimize the impact of the rounding, you can select that “annual” pension amounts be displayed. Estimates are based on the interest rate in effect for the month the estimate is run. Interest rates change monthly, which means if you run an estimate prior to the month immediately prior to your retirement date, your final pension figures could be slightly higher or lower.
- An MS Teams (virtual) meeting can be scheduled with a member of the pension team to assist you through the retirement process, answer your questions, and assist you with completing the paperwork.
- The pension team will ask you to confirm that you have officially and in writing, notified your manager of your intention to retire, and that your termination has been coded in Workday.
- The pension team will process payment of your pension upon electronic receipt of your completed paperwork. Alternatively you can send the signed orginal documents to the Pension Team’s attention in Human Resources, or use the drop box located beside HR’s main entrance in the lobby of EC1.
- Your completed pension election form(s), appendix (if applicable), completion of the required forms, as well as a “void” cheque and proof of age for both you and your spouse (if applicable) are required to process your pension. Proof of age should be a government issued photo identification, such as a passport or driver’s license.
- Your first pension payment will be deposited into your bank account within your first month of retirement; the exact deposit date will depend on the volume of pensions being processed for the month. All subsequent pension payments will be deposited on the first calendar day of each month.
Speak with your department about last day procedures
- You may need to hand in equipment, keys etc. Parking keys should be returned to Parking Services.
Apply for government benefits
- If you plan to commence your Canada Pension Plan (as early as age 60) and Old Age Security (as early as age 65) government benefits at retirement, you need to apply for these benefits to commence. We recommend that you apply approximately 6 months in advance of your retirement date.
The formula used to calculate your pension depends on your final average earnings, your credited service and the average year's maximum pensionable earnings.
Final average earnings (FAE) - average of your annualized base earnings during the 60 continuous months of highest earnings during your last 10 years of employment at the University.
Credited service - the total number of years and complete months of continuous employment with the University during which you have made required contributions to the University’s pension plan.
Average year's maximum pensionable earnings (average YMPE) - under the Canada Pension Plan (CPP) there is a maximum amount each year on which you make contributions to the CPP. This is referred to as the year's maximum pensionable earnings or YMPE. The average YMPE is determined by averaging the YMPE in the year of retirement plus the YMPE in the four preceding years.
The pension determined by the formula is a single life pension commencing on your normal retirement date (age 65) and payable for your lifetime, with a 10 year guarantee. This is referred to as the normal form. The monthly pension is payable to you as long as you live, with 120 monthly payments guaranteed. The guarantee means should you die within the first ten years following retirement, a lump sum will be paid to your named beneficiary equal to the value of the remaining guaranteed payments. If your beneficiary is your spouse, your spouse will have the option to receive the monthly pension until the end of the guarantee period.
Alternate forms of pension at retirement
Just before you retire you will be provided an option package that will outline the amount of pension for each of the various forms of pension available to you under Waterloo’s pension plan. Once pension payments have started, you are not permitted to change the form of pension you have chosen. To assist you with this important decision, you will have the opportunity to schedule an MS Teams (virtual) meeting with a member of the pension team to review your pension options and obtain answers to any questions you may have.
Alternate forms of pension include:
- Single life pension with a 5 or 15 year guarantee, or no guarantee
You can elect a guarantee period of 5 years or 15 years, which will increase or decrease your monthly pension respectively, compared to the formula pension. You can also elect no guarantee period, which means no payments will be made after your death even if you die shortly after you retire. The pension amount with no guarantee is larger than the formula pension because there is no guaranteed payout; a special waiver must be signed to select this option.
- Joint and survivor pension
Pension legislation requires that, unless you and your spouse sign a waiver, you must elect a form of pension that, in the event of your death, will provide your spouse a survivor pension equal to at least 60% of your pension. This form is a joint and survivor pension. The amount of a joint and survivor pension will be lower than the formula pension because it is based on actuarial and mortality assumptions of two lives (you and your spouse) instead of just one (you).
One type of the joint and survivor form of pension reduces on the member’s death, meaning, in the event of your death, your spouse will receive a survivor pension equal to a percentage of the pension you were receiving immediately prior to your death. When you retire you choose a percentage equal to 50%, 60%, 75%, or 100% (no reduction). If your spouse dies before you, the pension will continue to be paid to you, without reduction, until your death and then payment will stop.
The other type of the joint and survivor form of pension reduces on the first person’s death, regardless of whether it is the member or the member’s spouse. This means that the pension will reduce to 60% on either your death or your eligible spouse’s death, and will be paid to the survivor for the survivor's lifetime.
A survivor pension can only be paid to the person who was your spouse when you retired.
If you have a spouse when you retire and you elect to receive a form of pension that does not provide at least a 60% survivor pension, you and your spouse must sign a waiver form.
The Income Tax Act (ITA) limits the maximum annual pension that can be paid from a Registered Pension Plan (RPP). Historically, an additional pension in excess of the Income Tax Act limit was provided from a non-registered plan, called the Payroll Pension Plan. This non-registered Payroll Pension Plan was phased out effective January 1, 2022, in order to amend the Pension Cap defined under the registered pension plan effective January 1, 2021 and January 1, 2022.
Post-retirement Cost of Living Adjustment (COLA)
Post-retirement cost of living adjustments, also referred to as COLA or indexation, are applied to pensions in pay on May 1 of each year. COLA is based on the year over year increase in the Consumer Price Index.
Effective May 1, 2014, guaranteed indexation is applied as follows:
- pension earned as of December 31, 2013* will be indexed at 100% of consumer price index (CPI) to a maximum of 5%,
- pension benefit earned as of date of retirement less the pension benefit earned as of December 31, 2013, will be indexed at 75% of CPI to a maximum of 3.75%.
If CPI exceeds of 5% in any year, the plan guarantees an increase in a member's pension based on CPI of 5% (3.75% for 75% CPI); an increase above 5% (3.75% for 75% CPI) will be determined by the Pension & Benefits Committee taking into consideration the fund's ability to afford the cost.
* Based on your pensionable earnings history and 36-month final average earnings, credited service, and average Year’s Maximum Pensionable Earnings, as of December 31, 2013.