Your OPTrust pension and turning age 65
One of the most common questions we receive from OPTrust pensioners and active members is why their pensions change when they reach age 65. When a pensioner turns age 65, their temporary OPTrust benefit ends because they are now eligible to collect a CPP retirement pension.
OPTrust and the Canada Pension Plan
Canada Pension Plan (CPP) provides retirement benefits to individuals who have contributed to it during their employment. The pension is designed to replace about 25% of the earnings on which you contributed to CPP during your career. Your OPTrust pension is designed to provide you with a combined pension income – from both OPTrust and CPP – that equals approximately 2% of your average annual salary multiplied by your years of pension service in the OPSEU Pension Plan during your membership
While you were an active plan member, you made reduced contributions to OPTrust because you were also contributing to CPP. This contribution “integration” is taken into account in the way your OPTrust pension is calculated starting at age 65 (see chart above).
If you retire early (before age 65), OPTrust pays the full 2% pension benefit (see chart). This temporary benefit helps level your pension income until age 65 when you can collect an unreduced CPP retirement pension. Starting at age 65, your OPTrust pension will be reduced to reflect the fact that you are now eligible for CPP. So after age 65, your 2% pension will be made up of an OPTrust portion plus a CPP portion. For a breakdown of how this works refer to the examples below.
Let’s say Samir retired on February 1, 2015 at age 62, with an unreduced OPTrust pension. Samir decides that he will start CPP at age 65. Example 1 is a snapshot showing how CPP integration affects Samir’s annual income before and after age 65.
Example 1: Starting CPP at age 65
Now let’s see what happens if Samir retires at age 62 and starts taking CPP at the same age. Example 2 shows the impact of CPP integration on Samir’s retirement income before and after 65, under this scenario.
Example 1: Starting CPP at age 62
Even though the normal age for starting CPP benefits is 65, you can apply for a CPP pension as early as age 60. If you receive an early CPP pension, it is reduced 6% for every year you are less than 65. CPP annual maximum benefits increase every year to reflect changes in the cost of living. The maximum monthly CPP retirement pension in 2015 is $1,065.00.
Old Age Security
In addition to CPP, you may be entitled to a retirement benefit from Old Age Security (OAS). It is payable monthly and indexed quarterly. Your OPTrust pension is not adjusted due to OAS payments.
OAS payments are separate from OPTrust and CPP payments. OAS starts at age 65 and cannot be taken any earlier. In the first quarter of 2015, the maximum OAS monthly basic benefit payment is $563.74.
Want more information?
For more detailed information on your OPTrust pension and the Canada Pension Plan, read our booklet Your Pension during Retirement available online or in print.
The CPP benefit calculation can be complex. As well, CPP benefits and contributions change over time. For information on your CPP benefits, we suggest you contact the Canada Pension Plan directly at www.servicecanada.gc.ca and click “Seniors” or toll-free at 1-800-277-9914 (within Canada and the United States).
Frequently Asked Questions
How is my age 65 pension calculated?
Your OPTrust pension has two components – a lifetime retirement pension benefit, plus a temporary benefit if you retire before age 65 as shown on page 2. We calculate your lifetime pension at age 65 as:
OPTrust will provide you with a statement six months before you turn age 65 to show your lifetime pension amount from the Plan.
My friend’s pension didn’t decrease as much as mine did at age 65. Isn’t the reduction the same for everyone?
The formula for calculating the reduction is the same for every pensioner at OPTrust, but unless you and your friend had exactly the same average salary, amount of pension service and retired the same year, your reduction amount would be different (see example above).
My spouse is also receiving CPP. Will this affect my OPTrust pension too?
No. Your OPTrust pension is based only upon your contributions and pension service in the Plan. Your spouse’s income has no bearing on the formula for calculating your pension benefit or your spouse’s survivor benefit.
Retirement Income Calculator
OPTrust’s retirement income calculator can help you find out how:
- integration with CPP changes your OPTrust pension at age 65
- taking CPP early will affect your total retirement income, before and after age 65
- OAS payments at age 65 add to your total retirement income.