Pension Deduction Question

[copper]

I have noted that our pension deductions for the months of Oct, Nov and Dec double, this has also occurred in previous years.  The rest of the year the deductions stay constant, when UI and CPP premiums are maxed out in about Oct the pension deductions rise 100%...  I was to understand that your pension deduction was a % of your gross salary to be divided by 12 months and taken from your pay in equal installments.
When I queried the Pay Office I was told that "Simply, you are buying more pension credits which will come back to you in the end so don't worry about it"... But now looking at information on pensions, our pension is based on your best 5yrs salary, a % of that.  Therefore buying more pension credits really doesn't apply.?.
Also I just read an article in the paper where the pensioners of CBC have the administrators of their pension plan before the Supreme Court for over charging creating a surplus which was directed away from the intended recipients.
The Pension Act and related articles are written by lawyers for lawyers, Anyone got a handle on this??? ???

 

[Inch]

If they took your total percentage contribution and divided it equally over 12 months, you'd be in the hurt locker for the first part of the year while CPP and EI are coming off your pay and once they were paid up you'd get a whole bunch of extra cash. I prefer it the way it is, at least my pay checks are the same instead of low for the first part of the year then big towards the end of the year. My mortgage and loans don't get cheaper based on my pay checks.

 

[copper]

Inch: I understand what your saying, but, it doesn't answer any of the concerns I have raised, is this deduction correct.  And within my pay, taking those 3 months and spreading them over the 12 months like the rest of the payments would only cost me about $50 more a month <<< certainally not a hurt locker.

 

[Inch]

50 bucks is 50 bucks and it's actually a little more than that depending on how much you make. My pension contribution went up by almost $200, that'd work out to about a hundred bucks a pay that I'd be short early in the year. Wait till you're making more money and you'll understand that it gets worse the more you make, especially since CPP and EI are only paid on the first $39,000 that you make. I max out on those contributions in July, then my pension goes up and my pay checks stay the same or fairly close anyway.

So to answer your question, they don't divide your contribution up evenly over 12 months. It's divided up so that your pay checks are all pretty close to the same over the course of the year.

 

[tomahawk6]

Is all government retirement plan's the same ? Or is this plan just for the CF ?
US servicemen don't make a contribution towards their retirement.

 

[George Wallace]

The CF and RCMP retirement plans are different from the Civil Service retirement plans.  Due, probably, to the fact that the Civil Service has three or four different Unions (PSAC, PIPS, OPSU, and others) controlling their Plans.

GW

 

[DAA]

Let me try to answer this one but don't expect much because it can become overwhelming.

Pension contributions are based on a % of your gross annual income up to a maximum amount as set by CCRA (Revenue Canada).  However, that maximum is not spread across the full 12 months, but rather deducted on a % basis monthly until you reach the maximum.  Once there then your CFSA contributions are increased to 7.5% for the remainder of the year, which is the maximum that can be deducted for CFSA.  I believe the reason they did this was to maintain the long term financial viability of the CF Pension Fund, but I could be wrong.

But also remember, the rates for deduction change every year.

Check out the question "What is the rate of contribution for current service?"

http://www.admfincs.forces.gc.ca/pension/handbook_e.asp?sel=null

As far as the Pay Office telling you that you are just "buying more pension credits", they IMHO were being rather irresponsible in answering your question.  I always instilled in my staff to answer questions as accurately as possible and if they couldn't, then to find a co-worker/supervisor who could.  It is better to say "I am not certain but I will find someone who is" and spend the extra 5-10 minutes rather than give a wrong answer and have to spend a few hours trying to sort out a mess.

Hope this helps. 

"From a former NCO IC Pay Office"

 

[copper]

Excellant response, the web-site was clear and it makes perfect sense as to why the rates doubled when they did.  Thinking about e-mailing the site to our Orderly Room.

Thanks.

 

[DAA]

That's what I like.  A happy customer.