Reserve Pension- Merged

[RLD]

I posted this previously.
My buy back Excel spreadsheet shows contributions. Then interest is added. For the Part I.1, the interest added is 63% of the total.

RLD do you have your buy back spreadsheet with headings A to W? I think DND paid William Mericer a million dollars to develop a formula to make Reservists pay.

I had the Treasury Board President sitting at my dinning room table. He was incredulous. He passed it on the McKay. I got the usual letter.

I assume you are referring to the Excel calculator that was published on the pension website back in 2007 and then removed. If so then the latest update I did back in 2009 showed about 64% of the total part I.1 cost was interest. While I believe this is roughfully accurate (+/- 2 or 3%) there were errors in the calculator, for example it did not treat mid year interest calculations correctly if the election date was after 1 Jul in a given year, so I have not used it with the most recent info I have. The reason I believe this is roughfully accurate is that the corrected online calculator provided a final result that was close to what I got with the spreadsheet using the same input although of course it did not provide any details.

 

[Rifleman62]

PM to you via Yahoo.

No, I meant the spreadsheet of the calculations for my buyback done by Pension Services.

The methodology and the back and forth of the calculations is very interesting. You should have got an spreadsheet with your buyback. I am very suspicious of the calculations, but not knowing the "formula", and suspecting William Mericer made a million on the deal......

 

[RLD]

PM to you via Yahoo.

No, I meant the spreadsheet of the calculations for my buyback done by Pension Services.

The methodology and the back and forth of the calculations is very interesting. You should have got an spreadsheet with your buyback. I am very suspicious of the calculations, but not knowing the "formula", and suspecting William Mericer made a million on the deal......

Sorry. I didn't receive such a breakdown.

All I got from Pension Services was:
a. Statement of Service which gave a year by year breakdown of my CF Service;
b. Calculation of the Annuity which gave my total annuity and how it was arrived at; and
c. The Cost of Past Service Election (Part I and Parft I.1 sepefrate) but this only gave the total buyback cost, the lump sum payment I made, the amount outstanding and my monthly instalment.

My own calculations do bear out an interest cost of about 64% of total for a 32 year buyback.

 

[Rifleman62]

Minister John Baird (Foreign Affairs) is hosting CFRA Ottawa talk show. 1 800 580 2372. Try and get through.

 

[Rifleman62]

Got through, shook off, but took my phone number. Someone else PLEASE phone in. 30 minutes left.

 

[dapaterson]

And in their latest feat, the DND website has taken down the CFSA annual reports.

http://www.cmp-cpm.forces.gc.ca/pen/pa-ap/ar-ra/index-eng.asp

 

[Monsoon]

And in their latest feat, the DND website has taken down the CFSA annual reports.

http://www.cmp-cpm.forces.gc.ca/pen/pa-ap/ar-ra/index-eng.asp

DND had to take down about 70% of its web material on 1 Mar because the Supreme Court ruled that it didn't meet the "accessibility" right (bilingual, large-print format available and text-to-speech for the visually impaired, etc). Thank heavens the courts are out there to protect our rights!  Don't you all feel more empowered now? :

 

[Rifleman62]

To review, my buyback:

Should have been $126.5 K principal, plus $44.5 K interest @ 4% Simple Interest equals $171 K total buyback cost.
Actual amount is $126.5 K Principal, plus $148.1 K interest @ 7% Compound Interest equals $274.6 K total buyback cost. Increased interest cost of $103.6 K.

Actually paid $177.6 K of the $274.6 K, therefore still owed $97 K of additional interest charges financed by the government @4% Compound Interest charge of $74 K for a total owing over 20 years of $171 K. Thus total interest charged by the government is $222.1 K!! I would have had my pension paid off at the beginning if 4% Simple Interest was charged like everyone else in the government but the RPP.

After 56 monthly payments, totaling $40,000, the amount of the charge for the extra interest,$97 K has reduced 16.8 %  (coincidentally $16, 000), and the 4% Compound Interest on interest charge of $74 K has been reduced by 33% ($24,000).

Now that's loan sharking. My payments over 20 years are compound interest on compound interest.

 

[ArmyRick]

It seems to me that this whole thing is a royal rip off and just another chance to extort money from Canadians (Those serving in the reserves).

 

[bridges]

@ Rifleman62, kind of a disturbing eye-opener.  My annuity is already being received (minus buy-back) and I'm young enough to, hopefully, be in "the black" with the buy-back at some point, but it's occurring to me that it could have been much more if not for what my own government is charging.  rly:

After such a long wait & hassle, I'm reluctant to shake the pension boat, but having seen the results of your number-crunching I may reexamine my own buy-back numbers as well.  Maybe there's some way to reduce that interest by upping the monthly buy-back payment amount (?)

Very, very disturbing.  Thanks for sharing the detailed analysis with us.     

 

[corby41c]

Does anyone know if as a annuitant I need to payback what I received before choosing to BUYBACK x amount of years in the reserves?
Thanks

 

[DAA]

Does anyone know if as a annuitant I need to payback what I received before choosing to BUYBACK x amount of years in the reserves?
Thanks

If you did a CT to the PRes and were double dipping and want to buy back your Reserve time.  You have to pay back the pension money you received, plus the pension premiums payable on that time, plus the interest on the premiums.  It is cost prohibitive......as you most likely can't make that money back once you start drawing your pension again.

Example - you CT'd to the PRes in 2009, have been working full-time Class B since and collecting your Reg F CF pension at $35K per year for 3 years.  Now you want to surrender your pension due to the new employment policy, keep working full-time Class B but buy back the 3 years of Reserve time whilst you were double dipping.  So the cost is $35K x 3 years, plus CFSA premiums x 3 years, plus the interest on the premiums which is like 7%.  So you are looking at close to $120K.  In the end, your $35K pension will increase by 6% after buying back plus what ever else time you accumulate.

Pretty simple math.....

 

[corby41c]

What about making 16700 a year paying that back x 3, serving another 3 and retiring with a 26 year pension which is 2,400.00 per month
index immediatly.  The buyback for 3 years would be 12,000.00 Would you say it worth it ?

 

[DAA]

What about making 16700 a year paying that back x 3, serving another 3 and retiring with a 26 year pension which is 2,400.00 per month
index immediatly.  The buyback for 3 years would be 12,000.00 Would you say it worth it ?

If your current pension is $16,700, then the buy back may very well be be in the area of $60K.  So instead of getting @ $1,400 per month, you end up with $2,400.  The difference is $1,000, so you would have to collect your pension for 60 years to break even.

This is only an estimate on my part.  For a more realistic value, you would have to ask for a buy back calculation from Pension Services to see just what the damage would be...

 

[Rifleman62]

And wait several years from Pension Services for a reply.

 

[charlesm]

I just got my pension information in.

To buyback 1411.50 days. This will cost me $18,496.92. My Estimated Value that I had for this was $12,800.00. Compounded interest is a bitch!

I joined in Oct 1984I was Class "A" for all the buyback time except for some Class "B" Courses.

I have 3 options. Monthly Payments of $116, Lump Sum payment or RRSP Transfer or any combination.

Since I have headroom I will be transfering RRSP to buy this back.

Of course next year I top of the RRSP with the severance package.

 

[Eowyn]

If your current pension is $16,700, then the buy back may very well be be in the area of $60K.  So instead of getting @ $1,400 per month, you end up with $2,400.  The difference is $1,000, so you would have to collect your pension for 60 years to break even.

This is only an estimate on my part.  For a more realistic value, you would have to ask for a buy back calculation from Pension Services to see just what the damage would be...

If the estimated buy back is $60K and the increase estimated increase is $1,000 per month ($2,400 - $1,400), shouldn't the break even period be 60 months (vice years) or 5 years?

 

[bridges]

If the estimated buy back is $60K and the increase estimated increase is $1,000 per month ($2,400 - $1,400), shouldn't the break even period be 60 months (vice years) or 5 years?

:nod:  That's probably what he meant.

 

[DAA]

:nod:  That's probably what he meant.

Yup, my bad......  :nod:

 

[charlesm]

Finally got my pension buyback sorted out.

Always check what they send you as I did find discrepancies. RPSR is also not perfect.

It will cost me $18K and change for 22.4 years of Class "A" Service.

My Interest from August 2007 till now was $7192. My payment at $5 per month was $310. Balance is $6882.


Because I am doing a lump sum payment directly from my RRSP I have to pay $0 in interest.

From the Office.

"Lump sum payments/RRSP transfers are applied directly to the cost of the election and are treated as if they were paid on the date you signed your election, therefore no interest is charged following your election date. We will also reimburse your provisional payments made. Also, if you did decide to pay monthly, the interest is 4% compound. "

This made my day! Get back the $5 per month and no Interest.