||Volume 18, Number 3, November/December 2005
Teachers' pension plan
How did the job action affect your pension?
During the recent political protest, pension contributions ceased. Pension credit for this period cannot be purchased. Members will have lost one-half month of pensionable service for the two-week action.
However, members will not have lost any contributory service, because they worked in October. There is, therefore, no effect on a member’s pension as related to the early retirement reduction, or factor 90.
A typical Category 5 Max teacher earns, on average, an annual salary of $63,500. Each additional year of service increases the teacher’s pension by about $100 per month. If the teacher retires June 30, 2006, with an unreduced pension, the pension payment will be reduced by about $5 per month as a result of the two-week loss of service.
Any subsequent salary increase will probably more than offset the effect of this lost service.
Are pension purchases worthwhile?
Many members have periods of service that can be purchased to add to their pension. Whether or not a purchase is worthwhile depends on the member’s individual pension service, age, and salary information, in other words, the factors of their own pension calculation.
The easiest way to determine if a purchase is worthwhile, i.e., how long it will take to recover the cost, is to use the Purchase Cost Estimator available at pensionsbc.ca, click Teachers, click Tools.
Unfortunately, the Purchase Cost Estimator currently underestimates the cost benefit of a purchase, because:
- it only reports the increase to the lifetime portion of the pension.
- it does not report any increase to the bridge portion of the pension.
- does not calculate any increase due to lessening the early retirement reduction that applies to those retiring prior to age 60, or factor 90.
It is hoped that the on-line Purchase Cost Estimator will be revised in the near future.
A more reliable method for determining if a purchase is worthwhile, is to go through the following steps:
- Determine the estimated cost of the pension by using the online Purchase Cost Estimator.
- Produce two pension estimates (with and without the additional service that would be gained via the purchase) using the web site’s Personalized Pension Estimator.
- Compare the two estimates to determine the estimated pension increase that would be realized via the purchase.
- Determine the time required to recover the purchase cost by dividing the cost by the amount of the pension increase. Members may want to carefully analyze their investment options for purchases that take longer than 120 months to recover.
Generally, members should note the following:
- Reinstatements of refunds, especially for first refunds taken from the Teachers’ Pension Plan (TPP) are almost always worthwhile.
- Maternity and parental leave purchases, as under the Employment Standards Act, are also worthwhile.
- Other purchases may be worthwhile. Members should apply.
- Transfer of service from other provinces may be worthwhile. Members should apply for the transfer to determine if the combined pension is a better option than two separate pensions.
- Transfer of service from other BC pensions may be worthwhile. Phone the TPP at 1-800-665-6770.
Applications and Pensionfacts for the above may be found on the Teachers’ Pension Plan web site under Forms and Publications.
You may be able to increase your future pension benefit by purchasing service, but there are deadlines. You must apply before April 1, 2007, and while still an active member, to purchase the following:
- A leave of absence that ended before April 1, 2002
- Arrears for which you received notice before April 1, 2002
- Non-contributory service if you were already an active member on March 31, 2002
- Reinstatement of a refund if you were already an active member on March 31, 2002. (This also applies to reinstating refunds taken from the BC Municipal Plan and the BC Public Service Plan; the deadline for reinstating a refund from the BC College Pension Plan is February 28, 2007.)
There are other deadlines. You must apply to purchase the following by the deadlines shown:
- Leaves of absence that ended on or after April 1, 2002—within five years of the end of the leave period, or before you terminate your current employment, whichever occurs first.
- Arrears for which you received notice after March 31, 2002—within five years of when the plan sent written notice to you, or before you terminate your current employment, whichever occurs first.
- Non-contributory service where you became an active member after March 31, 2002—within five years of the date you enrol in the plan, or before you terminate your current employment, whichever occurs first.
- Reinstatement of a refund where you became an active member after March 31, 2002—within five years of the date you begin to again contribute to the plan, or before you terminate your current employment, whichever occurs first.
Finally, the BCTF website at bctf.ca/pensions also provides a significant amount of information for members, including a number of notices and links related to pensions and income security and the schedule of 2005–06 Pension Seminars.
BCTF staff are available to assist with all of the above. Telephone 1-800-663-9163 or email directly to firstname.lastname@example.org or email@example.com.
Age + service = 88? Don't wait!
If you are age 64, or your age and contributory service total 88, you may voluntarily withdraw from the BCTF Salary Indemnity Plan: Long Term.
If you are age 65, or your age and service total 90, you are no longer eligible for long-term benefits, and you should withdraw.
It is necessary to apply to withdraw—the forms are available from the Income Security Division (604-871-1920 or 1-800-663-9163), or online at bctf.ca/pensions/salary/LT-withdrawalForm.shtml.