Amendments to the Canada Pension Plan to be phased in from 2011 to - - PowerPoint PPT Presentation

Now and Tomorrow Excellence in Everything We Do

Amendments to the Canada Pension Plan to be phased in from 2011 to 2016

Technical Presentation

Last updated in May 2011

This document contains information on the Canada Pension Plan (CPP). In case of dispute, the wording and provisions of the Canada Pension Plan and Regulations prevail.

About this presentation

• The following presentation is intended to describe the changes which

are currently being implemented to the Canada Pension Plan (CPP) at are currently being implemented to the Canada Pension Plan (CPP) at a technical level.

• This presentation is primarily directed at financial planners and other

individuals well-versed in the current CPP provisions individuals well versed in the current CPP provisions.

• This presentation is intended to demonstrate the impacts of these

changes, and how they interact, in order to assist in making decisions about when to begin benefits in retirement.

• This presentation is separated in 3 main sections:

– Pages 3 to 17: General information about the C-51 Changes – Pages 18 to 47: Example case studies – Pages 48 to 59: CPP Retirement Benefit and Post-Retirement Benefit Calculations tables

• This presentation was created for information purposes only.

Individuals should base their decisions on their personal situations

2

Individuals should base their decisions on their personal situations.

Outline of presentation

• Modernizing the Plan to adapt to societal trends
• Four changes

Four changes

• Choices depend on individual wants and needs
• Summary of effective dates
• Sources of additional information
• Examples of the new legislation’s application
• Annex: Calculation tables and formulas
• Annex: Calculation tables and formulas

3

CPP is adapting to societal trends p g

• The CPP provides partial income replacement in the case of retirement,

p p p disability, and death.

• Canadians are living longer and healthier lives, and this is creating greater
• pportunities for employment later in life Retirement is a process that often
• pportunities for employment later in life. Retirement is a process that often
• ccurs in stages, rather than as a one-time event.
• Changes to the CPP will ensure that the Plan remains actuarially fair and

g y financially sustainable and that it responds to the evolving needs of Canada’s aging population and to changes in the economy and labour market.

• These amendments will be implemented gradually from 2011 to 2016

These amendments will be implemented gradually from 2011 to 2016.

• Changes to the Plan may affect how and when contributors choose to retire

from work and when they decide to apply for a CPP retirement pension.

4

y pp y p

Summary of amendments to the CPP y

Amendment 1 Amendment 2 Amendment 1 Restore the adjustment factors to their actuarially fair levels for retirement pensions taken before Allow CPP retirement pension recipients who work to make contributions to a new Post-Retirement Benefit.* p and after age 65. Amendment 3 Eliminate the requirement to stop working or decrease earnings in order Amendment 4 Enhance the general drop-out provision to exclude up to an additional working or decrease earnings in order to qualify for a reduced CPP retirement pension. provision to exclude up to an additional year of low earnings from the benefit calculation.

5

* Those who receive a retirement pension from the Quebec Pension Plan and work in

Canada outside Quebec will be required to pay CPP contributions.

Rebalancing the adjustment factors for early and late retirement pensions is required for early and late retirement pensions is required…

Rationale:

Amendment 1

• The adjustment factors ensure that the effect
• n the Plan is the same over time regardless
• f when individuals choose to begin their

Amendment 1 Restore the adjustment factors to their actuarially fair levels for retirement

Adj t t f t fl t l th f ti i t d t i pension.

pensions taken before and after age 65.

• Adjustment factors reflect length of time a person is expected to receive

benefits (i.e. longer for early retirees / shorter for late retirees).

• Adjustment rate had been left unchanged since 1987 despite changes in life
• Adjustment rate had been left unchanged since 1987, despite changes in life

expectancy.

6

… to restore actuarial fairness.

Comparison between 1987 and new actuarial adjustment factors 105 125 145

stment (%)

New factors 1987 factors 65 85 105

Actuarial Adjus

45

60 61 62 63 64 65 66 67 68 69 70

Age of benefit take-up

A

g p

1987 Factors (Maximum): New Factors (Maximum at maturity):

Age 60: reduced by 30% Age 60: reduced by 36% (2016)

7

Age 60: reduced by 30% Age 60: reduced by 36% (2016) Age 70: increased by 30% Age 70: increased by 42% (2013)

Gradual changes with post-65 factors introduced faster

• Gradually increase pre-65 actuarial adjustment factors
• 0.5% per month
• 0.52%
• 0.54%
• 0.56%
• 0.58%
• 0.6% per month

2009 2016 2012 2013 2014 2015

notice period

• Increase post-65 actuarial adjustment factors:

+0.5% per month +0.57% +0.64% +0.7% per month p p

notice period

8 2009 2013 2011 2012

notice period

Working beneficiaries allowed to gain additional CPP retirement income to gain additional CPP retirement income…

Rationale:

• Canadians are living longer and healthier lives and

A d t 2

Canadians are living longer and healthier lives and some are working later in life.

• Presently, working CPP beneficiaries between 60

and 65 cannot contribute to the CPP. Th CPP i h i t b tt i th t

Amendment 2

Allow CPP retirement pension recipients who work to make contributions to a new Post-

Starting in 2012, for individuals who work while receiving their CPP retirement pension:

• The CPP is changing to better recognize that

retirement is a process that often occurs in stages.

Retirement Benefit.

• Under age 65: contributions are mandatory for the pensioner and their employer.
• Between 65 and 70: contributions are optional. If an individual chooses to contribute,

their employer will have to contribute. p y Contributions made while receiving the CPP retirement pension will build up only Post- Retirement Benefits. These contributions do not create eligibility or increase the amount of

• ther CPP benefits (e.g. retirement, survivor, disability).

9

These contributions are not subject to a credit split upon separation, divorce or the end of a common-law relationship.

…with the new Post-Retirement Benefit!

• The Post-Retirement Benefit (PRB) is a new benefit that is separate from other

CPP benefits Each year that an individual contributes will generate a new CPP benefits. Each year that an individual contributes will generate a new PRB, which is payable the following year and will continue for the rest of the individual’s life.

• PRBs are cumulative, with each year’s new benefit being added to previously

PRBs are cumulative, with each year s new benefit being added to previously earned PRBs, even if the individual is already receiving the maximum CPP retirement pension.

• As it is a separate benefit, PRB amounts are not subject to pension sharing.
• A PRB becomes effective on January 1 of the year following CPP contributions

toward the PRB. The PRB is indexed and subject to the actuarial adjustment based on the recipient’s age at that time. Th PRB t h t 1/40th f th l i ti t

• The PRB amount can reach up to 1/40th of the annual maximum retirement

pension ($288 per year or $24 monthly for 2011) 2011) for each year, adjusted for age.

10

Elimination of work cessation test

Rationale:

Amendment 3

• Retirement now tends to be a process

rather than a one-time event.

Amendment 3 Eliminate the requirement to stop working or decrease earnings in order to qualify for

• Today, older workers may stop and restart

working, reduce their hours of work, or change the nature of their work.

g q y a reduced CPP retirement pension.

• Many want the flexibility to continue to work without interruption when they

begin to receive their CPP retirement pension.

• The elimination of the work cessation test avoids disruptions in the income of

workers and in the human resources of employers.

11

• It better reflects how Canadians choose to live, work and retire.

More years of low or zero earnings will be dropped from benefit calculation benefit calculation

A d t 4 Rationale:

P l i d t f th l b f f

Amendment 4

Enhance the general drop-out provision to exclude up to an additional year of low earnings

• People move in and out of the labour force for

a variety of reasons (e.g. school, layoffs, providing care, etc.).

• The CPP is changing to provide increased
• The general drop-out provision will increase from the current 15% of low

y g from the benefit calculation.

The CPP is changing to provide increased pension protection for low-earning years and time spent outside the workforce. The general drop out provision will increase from the current 15% of low earnings to 16% in 2012 and 17% in 2014.

• This will likely increase the benefit amount, helping those with gaps in

contributions – for example, from involuntary periods out of the workforce.

• This will help mitigate the effects of a greater benefit reduction for those who

start receiving their CPP retirement pension before age 65

12

start receiving their CPP retirement pension before age 65.

• It will also increase the average disability and survivor’s pension.

Who is affected by the changes? y g

• Individuals WILL be affected by changes, if they are:

An employee who contributes to the CPP; – An employee who contributes to the CPP; – A self-employed person who contributes to the CPP; – Between the ages of 60 and 70 and work while receiving a CPP retirement pension (or work in Canada outside of Quebec while receiving retirement pension (or work in Canada outside of Quebec while receiving a QPP retirement pension).

• The changes also affect employers who contribute to the CPP on behalf of

The changes also affect employers who contribute to the CPP on behalf of their employees.

• Individuals WILL NOT be affected by these changes if they started receiving a

y g y g CPP retirement pension before December 31, 2010, and they remain out of the workforce. – They may, however, be required to make contributions toward the new P t R ti t B fit if th t t k ft D b 31 2011

13

Post-Retirement Benefit if they return to work after December 31, 2011.

Considerations

• An individual under age 65 should consider the fact that once they

receive the CPP retirement pension they generally will not be eligible receive the CPP retirement pension, they generally will not be eligible for the CPP disability benefit if they subsequently become disabled.

• The new adjustment factors will further increase the pension for those
• The new adjustment factors will further increase the pension for those

who start receiving it after age 65, and further reduce it for those who start receiving it before 65.

• In general, as a result of these changes, a contributor who applies for

the CPP retirement pension at age 70 would receive approximately double the annual benefit they would have received had they applied for the CPP at age 60 (as of 2016), even if they do not continue to work after age 60.

14

Choices depend on an individual’s wants and needs

• When deciding whether to apply for the CPP retirement pension prior to age

g pp y p p g 65, at age 65, or after age 65 (up to age 70), contributors should consider their personal life circumstances. – Sources of income, current and future Sources of income, current and future – Employment status now and in the future – Contributor’s health – History of employment and CPP contributions History of employment and CPP contributions – Whether CPP pension credits were split following a divorce, separation or the end of a common-law relationship – Plans for retirement

15

Summary of effective dates y

• Actuarial Adjustment Factors
• Actuarial Adjustment Factors
• January 2011: Begin increasing post-65 adjustment factors
• January 2012: Begin increasing pre-65 adjustment factors
• Contributions from CPP retirement pension recipients toward the

new Post-Retirement Benefit

• January 2012 (Benefit payable in 2013)
• Elimination of work cessation test for early receipt of CPP retirement

pension

• January 2012

y

• Enhancement of General Drop-out Provision
• January 2012 (16%) and January 2014 (17%)

16

Need more information?

• Useful links

– Service Canada – Canada Pension Plan (hyperlink) (www.servicecanada.gc.ca/eng/isp/cpp/cpptoc.shtml) – Annual Reports of the Canada Pension Plan (hyperlink) – (http://www.rhdcc-hrsdc.gc.ca/eng/oas-cpp/reports/index.shtml) – Canada Pension Plan Actuarial Reports (hyperlink) – (http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?DetailID=499) – Bill C-51, Economic Recovery Act (stimulus) (hyperlink) (http://www2.parl.gc.ca/HousePublications/Publication.aspx?Docid=411587 1&file=4)

17

)

Examples

• f the New Legislation’s

Application

The following examples are not recommendations. Individuals should base their decisions on their personal situations.

18

Two financial parameters determine the optimal time to receive a CPP retirement pension receive a CPP retirement pension

• The CPP provides a great deal of flexibility in choosing the time to take the

retirement pension (ages 60 to 70) The amounts that individuals receive are retirement pension (ages 60 to 70). The amounts that individuals receive are affected by when they choose to take their pensions.

• Generally, individuals will consider one or both of these factors in choosing

y, g the time to begin receiving their CPP retirement pension:

1) the pension amount payable per month; and/or 2) the total retirement benefits collected from the Plan.

• Influencing these two parameters are:

– Age of individual and time of CPP retirement g – Health considerations and – Labour market participation before and/or after receiving the pension

19

• The following case scenarios examine both parameters and their interaction.

Consideration: Tendency to underestimate lifespan as life expectancies increase

• With health care advancements and

quality of life improvements over the

life expectancies increase

Life expectancy increases during life time

100 0 105.0

quality of life improvements over the last 40 years, people are living longer than was predicted at the time of their birth.

85 0 90.0 95.0 100.0

Life Expectancy

Female Male

• The average life expectancy of an

individual who turned 60 in 2010 is projected to be an additional 27 2

75.0 80.0 85.0 At Birth 60 65 70 75 80 85 90 95 100 A person born in 1966 reaching this age

projected to be an additional 27.2 years [age 87] for a woman, and 24.7 years [age 84] for a man.

1966 1980 1990 2000 2010 2015 2025 2050

Years of life remaining at age 60 and 65

A person born in 1966, reaching this age

• The average life expectancy of an

individual who turned 65 in 2010 is projected to be an additional 22.6

60 22.9 24.1 25.4 26.4 27.2 27.5 28.0 29.3 65 18.5 19.7 20.8 21.9 22.6 22.9 23.5 24.6 60 17.8 19.5 21.6 23.5 24.7 25.1 25.8 27.1

20

years [age 87] for a woman, and 20.3 years [age 85] for a man.

65 14.0 15.5 17.2 19.0 20.3 20.7 21.3 22.6

Note: Life Expectancy projections presented here are taken from the 25th Actuarial Report on the CPP

Sample Case 1 Gradual transition to retirement with average career earnings Gradual transition to retirement with average career earnings

• Mr. Brown (born 1953) plans to gradually transition to retirement: he will switch to part-

time work at age 63 and fully retire at 68, while continuously contributing to the CPP.

• Mr Brown has a work history with few gaps and an employer sponsored pension In
• Mr. Brown has a work history with few gaps and an employer-sponsored pension. In

2013, his expected unadjusted CPP retirement pension is about 90% of the maximum.

• Mr. Brown will continue to work full-time at (or above) the year’s maximum

pensionable earnings (YMPE), and part-time at 50% of YMPE ($24,150 in earnings, $1,022.18 in contributions)

• If he is healthy and has an average life expectancy (82), when is the optimal time to

take his retirement pension?

When to start CPP retirement pension to maximize

• Begin receiving CPP

Start CPP retirement C ti t ib ti

retirement pension to maximize pension payments?

• Begin receiving CPP

retirement pension at 60, and;

• Continue contributing
• Start CPP retirement

pension at 63 or 65.

• Continue contributing

to the CPP while working

• Continue contributing

to the CPP while working part-time.

• Start CPP retirement

21

to the CPP while working part-time. g part-time. Sta t C et e e t pension at 68.

Sample Case 1: Scenario 1 Start CPP at 60 continue contributing while working Start CPP at 60, continue contributing while working

• Mr. Brown’s work history is such that his unadjusted retirement pension will be $863.27,

including 16% of the general drop-out. As he reaches 60 in 2013, the new actuarial reduction

• f 32.4% will apply (i.e., pension would be 67.6% of full pension at 65). Therefore, his actual

pension at age 60 will be: $863.27 x 67.6%=$583.57

• Suppose earnings from work after CPP retirement
• The monthly PRB is a separate benefit Each year of contributions results in a

2013 (60) – 100% of YMPE 2016 (63) – 100% of YMPE 2019 (66) – 50% of YMPE 2014 (61) – 100% of YMPE 2017 (64) – 50% of YMPE 2020 (67) – 50% of YMPE 2015 (62) – 100% of YMPE 2018 (65) – 50% of YMPE 2021 (68) – 50% of YMPE

The monthly PRB is a separate benefit. Each year of contributions results in a new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2014 – $17.55 2017 – $22.27 2020 – $14.02 2015 – $18 99 2018 – $12 00 2021 – $15 02

Th t t l thl i t 69 i th f ll PRB d th l

2015 $18.99 2018 $12.00 2021 $15.02 2016 – $20.54 2019 – $13.01 2022 – $16.03

22

• The total monthly pension at age 69 is the sum of all PRBs and the early

retirement benefit taken at 60 = $733.00. If life expectancy is 82 years, the total amount collected from the CPP will be $193,825.

Sample Case 1: Scenario 2

St t CPP t 63 h f ll ti k t ti t ti k Start CPP at 63 when full-time work stops, continue part-time work

• By continuing to work and starting his pension later, Mr. Brown increases his lifetime average
• earnings. His unadjusted retirement pension will now be $892.53, including the 17% general

d t A h t 63 i 2016 th t i l d ti f 14 4% ill l (i i drop-out. As he turns 63 in 2016, the new actuarial reduction of 14.4% will apply (i.e., pension is 85.6% of full pension at age 65). His actual pension at age 63 will be: $892.53 x 85.6%=$764.01

• Earnings from work after CPP retirement
• The monthly PRB is a separate benefit. Each year of contributions results in a new PRB,

2016 (63) – 100% of YMPE 2018 (65) – 50% of YMPE 2020 (67) – 50% of YMPE 2017 (64) – 50% of YMPE 2019 (66) – 50% of YMPE 2021 (68) – 50% of YMPE

y p y , payable the following year and actuarially adjusted for the age of the contributor.

2017 – $22.27 2019 – $13.01 2021 – $15.02 2018 – $12 00 2020 – $14 02 2022 – $16 03

• The total monthly pension at age 69 is the sum of all PRBs and the early retirement

pension taken at 63 = $856.36.

2018 $12.00 2020 $14.02 2022 $16.03

23

p $

• If life expectancy is 82 years, the total amount collected from the CPP will be $201,773.

Sample Case 1: Scenario 3

Work full time to 63 start CPP at 65 continue part time work until 68 Work full-time to 63, start CPP at 65, continue part-time work until 68

• At age 65, (2018) Mr. Brown’s unadjusted retirement pension will be $891.46.

Note: This amount is almost identical to the one in Scenario 2. Years of lower or zero earnings at the end of a career may reduce a contributor’s lifetime average, and thus, their unadjusted retirement amount. However, as he will start receiving his benefit at age 65, there is no actuarial adjustment. Therefore, his actual pension is also $891.46, which is higher than in Scenario 2.

Suppose earnings from work :

2018 (65) – 50% of YMPE 2020 (67) – 50% of YMPE 2019 (66) – 50% of YMPE 2021 (68) – 50% of YMPE

• The monthly PRB is a separate benefit. Each year of contributions results in a

new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2019 – $13.01 2021 – $15.02

• The total monthly pension at age 69 is the sum of all PRBs and the full

retirement benefit taken at 65 = $949.54.

2020 – $14.02 2022 – $16.03

24

$

• If Mr. Brown lives to age 82, the total amount collected from the CPP will be

$203,298.

Sample Case 1: Scenario 4

Work full time to 63 work part time until 68 (and start CPP then) Work full-time to 63, work part-time until 68 (and start CPP then)

• At age 68, Mr. Brown’s unadjusted CPP retirement pension will be $928.38.

Note: This increase is the result of earnings substitution which allows someone who has not yet taken up their retirement pension and continues to work past the age of 65 to replace earnings gaps in their earlier work history (such as periods of unemployment) with months of earnings after age 65. ( p p y ) g g

• In 2021 the new adjustment factor for starting the pension at age 68 is 125.2%.
• Thus, Mr. Brown’s actual retirement pension will be:

$928.38 x 125.2%=$1,162.33 If t ib t t hi h CPP ti t i til ft 65 (

• If a contributor postpones his or her CPP retirement pension until after age 65 (up

to age 70), there will likely be a significant increase in the retirement pension.

• If Mr. Brown lives to age 82, the total amount collected from the CPP will be

25

g , $209,219.

Sample Case 1: Summary p y

1) Start CPP at 60 Continue working 2) Stop working full-time at 63 and begin CPP then 3) Stop working full-time at 63, 4) Stop working full-time at 63, full-time until 63 and then part- time, contributing until 68 begin CPP then, and continue part- time work, contributing until 68 continue part-time work, contributing until 68, and start CPP at 65 continue part- time, contributing until 68, and start CPP at 68 CPP at time of receipt

$583.57 $764.01 $891.46 $1,162.33

CPP (with PRBs)

$733 00 $856 36 $949 54 $1 162 33

at age 69

$733.00 $856.36 $949.54 $1,162.33

Total amount collected from the CPP by age 82

$193,852 $201,773 $203,298 $209,219

• In this example, Scenario 2 and Scenario 3 produce similar results in terms of the total

amount collected from the Plan. However, the monthly benefit will be higher if the retirement pension is taken at age 65 (Scenario 3) rather than 63 (Scenario 2).

26

• If an individual with a continuous work history has average or above average life expectancy,

postponing receipt of the pension until age 68 will likely produce superior results for both the total amount collected from the Plan and the monthly benefit.

Sample Case 2 Interrupted career earnings and small expected pension Interrupted career earnings and small expected pension

• Ms. Smith reaches 65 in 2017 and plans to supplement her pension by

working part-time at 10% of the average wage g p g g

– Annual earnings of $4,830 and contributions of $65.84, in 2011 dollars.

• Ms. Smith spent 10 years outside the workforce to care for her young

children.

• In addition to this, she has an interrupted employment history and her

expected unadjusted CPP retirement pension is 35% of the maximum.

• She is healthy and has an average life expectancy (85).

When to start CPP retirement pension to maximize pension payments?

• Start CPP retirement

pension at 64 or 65, continue working and

• Start CPP retirement

pension at 65 with no f th t ib ti

• Continue working part-

time until 70 and start CPP retirement pension

27

continue working and contributing to CPP until 70 further contributions. CPP retirement pension at 70.

Sample Case 2: Scenario 1 Start CPP at age 64 continue contributing until 70 Start CPP at age 64, continue contributing until 70

• Based on her work history, Ms. Smith’s unadjusted retirement pension will be

$332.79, taking into account the new 17% general drop-out. As she reaches 64 in 2016, the new actuarial reduction of 7.2% will apply (pension is 92.8%). Her actual 2016, the new actuarial reduction of 7.2% will apply (pension is 92.8%). Her actual pension at age 64 will be: $332.79 x 92.8%=$308.83

• Earnings from work:
• The monthly PRB is a separate benefit Each year of contributions results in a

2016 (64) – 10% of YMPE 2018 (66) – 10% of YMPE 2020 (68) – 10% of YMPE 2017 (65) – 10% of YMPE 2019 (67) – 10% of YMPE 2021 (69) – 10% of YMPE

• The monthly PRB is a separate benefit. Each year of contributions results in a

new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2017 – $2.40 2019 – $2.80 2021 – $3.21

• The total monthly benefit amount at age 71 is the sum of all Ms. Smith’s PRBs

and her CPP retirement pension (taken at age 64) = $326.25.

• If Ms Smith lives to age 85 she will collect a total amount of $85 355 from the

2018 – $2.60 2020 – $3.00 2022 – $3.41

28

• If Ms. Smith lives to age 85, she will collect a total amount of $85,355 from the

CPP.

Sample Case 2: Scenario 2 Start CPP at 65 continue contributing until age 70 Start CPP at 65, continue contributing until age 70

• Based on her work history (and additional year of work), Ms. Smith’s unadjusted

retirement pension will be $326.92. In 2017, the new 17% general drop-out will

• apply. As she retires at 65, there will be no upward or downward adjustment to her

2017 (65) – 10% of YMPE 2019 (67) – 10% of YMPE 2021 (69) – 10% of YMPE

• apply. As she retires at 65, there will be no upward or downward adjustment to her

CPP retirement pension. Her actual pension amount will be $326.92.

• Earnings from work:
• The monthly PRB is a separate benefit. Each year of contributions results in a

PRB bl th f ll i d t i ll dj t d f th f

2018 (66) – 10% of YMPE 2020 (68) – 10% of YMPE

new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2018 – $2.60 2020 – $3.00 2022 – $3.41 2019 – $2.80 2021 – $3.21

• The total monthly pension at age 71 is the sum of all PRBs and the CPP

retirement pension (taken at age 65) = $341.94.

• If Ms. Smith lives to age 85, she will collect a total amount of $85,604 from

$ $

29

g , $ , the CPP.

Sample Case 2: Scenarios 3 and 4

Scenario 3. Start CPP retirement pension at 65 with no further contributions

• Based on her work history Ms Smith’s unadjusted retirement pension will be
• Based on her work history, Ms. Smith s unadjusted retirement pension will be

$326.92. In 2017 the new general drop-out of 17% will apply. As she takes her pension at age 65, it will not be adjusted upward or downward. Her actual pension amount will be $326.92.

• If she ceases contributing to the CPP, no additional benefits are earned.
• If she lives to age 85 the total collected from CPP will be $82 383

If she lives to age 85, the total collected from CPP will be $82,383. Scenario 4. Continue contributing until 70 and start retirement pension at 70

• Based on her additional years of contributions Ms Smith’s unadjusted retirement

Based on her additional years of contributions, Ms. Smith s unadjusted retirement pension will now be $342.55. As she takes the pension at age 70 in 2022, the new general drop-out of 17% and the new actuarial adjustment of 42% will apply. Her actual CPP retirement pension will be: $342 55 142% $486 42

30

$342.55 x 142%=$486.42

• If she lives to age 85, she will collect a total amount of $93,392 from the CPP.

Sample Case 2: Summary p y

1) Start CPP at 64 and continue t ib ti til 2) Start CPP at 65 and continue t ib ti til 3) Start CPP at 65 with no further 4) Continue contributions until 70 d t t contributing until 70 contributing until 70 with no further contributions 70 and start CPP at 70 CPP benefit at time of receipt

$308.83 $326.92 $326.92 $486.42

e o ece p CPP benefit (with PRBs) at age 70

$326.25 $341.94 $326.92 $486.42

Total collected

• If a contributor has an inconsistent employment history and is able and willing to work and continue

contributing to the CPP, postponing receipt of the CPP retirement pension will increase the benefit amo nts recei ed (gi en a erage or abo e a erage lifespan) from the CPP by age 86

$85,355 $85,604 $82,383 $93,392

amounts received (given average or above-average lifespan).

• Delaying taking the retirement pension by one year (65 vs. 64) results in a small increase in benefits

(Scenarios 1 and 2). The largest monthly benefits and total amounts collected over a lifetime can be

• btained by continuing to contribute and getting the maximum actuarial adjustment by taking the

CPP retirement pension at age 70 (Scenario 4).

• Continuing to contribute to the CPP after collecting the retirement pension will increase the amount

31

• Continuing to contribute to the CPP after collecting the retirement pension will increase the amount
• f benefits through the PRB; however, due to the actuarial adjustments, greater total benefit

amounts may be received by postponing taking the retirement pension until after age 65.

Sample Case 3 Poor health and below average life expectancy Poor health and below average life expectancy

• Mr. Scott reaches 60 in 2012. He was recently laid off and is in poor health.
• As a result, he now works part-time, earning 10% of the average annual

wage (annual earnings $4 830; contributions $65 84) wage (annual earnings $4,830; contributions $65.84).

• Earlier in his career, Mr. Scott had a few work interruptions and his income

was below average. His expected unadjusted pension is 50% of the maximum retirement pension. p

• He has less than an average life expectancy (age 69).

When to start CPP retirement pension to maximize

St t CPP ti t

pension payments?

• Begin receiving CPP

retirement pension at 60

• r 61
• Start CPP retirement

pension at 65.

• Start CPP retirement

pension at 60.

• Work part-time and

continue contributing to

32

• r 61.

g the CPP until age 64.

Sample Case 3: Scenario 1 and 2

Scenario 1: Begin receiving CPP retirement pension at 60 with no further contributions contributions

• Based on his work history, Mr. Scott’s unadjusted retirement pension will be

$480.00, including a new general drop-out of 16%. As he reaches 60 in 2012, the new actuarial reduction of 31.2% will apply. His actual pension at age 60 will therefore be: $480.00 x 68.8%=$330.24

• If he lives to age 69, the total amount he will collect from the CPP will be $35,665.

Scenario 2: Work part time until age 61, begin receiving CPP retirement pension at 61 with no further contributions pension at 61 with no further contributions.

• Mr. Scott works one additional year at a lower wage; his unadjusted retirement

pension will be $471.50, including the new general drop-out of 16%. As he reaches 61 in 2013, the new actuarial reduction of 25.92% will apply. His actual pension at 61 in 2013, the new actuarial reduction of 25.92% will apply. His actual pension at age 61 will therefore be: $471.50 x 74.08%=$349.28

• If he lives to age 69 the total amount he will collect from the CPP will be $33 531

33

If he lives to age 69, the total amount he will collect from the CPP will be $33,531.

Sample Case 3: Scenario 3

Scenario 3: Keep working part-time until age 64, begin receiving CPP retirement pension at 65 with no further contributions.

• In 2017, a general drop-out of 17% will apply. In this case, the unadjusted

retirement pension is $443.95. As Mr. Scott starts the retirement pension at 65, his pension will not be adjusted upward or downward.

• If he lives to age 69, the total he will collect from the CPP will be $21,309.

34

Sample Case 3: Scenario 4 p

Scenario 4: Start retirement pension at 60 and continue contributing until 64.

• Actual CPP retirement pension at age 60 will be $330.24 as in Scenario 1.
• Earnings from work:

2012 (60) – 10% of YMPE 2014 (62) – 10% of YMPE

• The monthly PRB is a separate benefit. Each year of contributions results in a

new PRB payable the following year and actuarially adjusted for the

( ) ( ) 2013 (61) – 10% of YMPE 2015 (63) – 10% of YMPE

new PRB, payable the following year and actuarially adjusted for the contributor’s age.

2013 – $1.78 2015 – $2.07 2014 – $1.92 2016 – $2.23

• Retirement benefit with PRBs at age 65 = $338.24
• If Mr. Scott lives to age 69, he will collect a total amount of $36,280 from the

35

CPP.

Sample Case 3: Summary p y

1) Start CPP at 60 and no further 2) Start CPP at 61 and no further 3) Start CPP at 65 and no further 4) Start CPP at 60 and continue t ib ti ( til and no further contributions and no further contributions and no further contributions contributing (until 64) CPP benefit at time of receipt

$330.24 $349.28 $443.95 $330.24

e o ece p CPP benefit (with any PRBs) at age 65:

$330.24 $349.28 $443.95 $338.24

T t l ll t d

• If a contributor has poor health and a short life expectancy, the total amount they

ll f h CPP b hi h if h b i i i h i i

Total collected from CPP by age 69

$35,665 $33,531 $21,309 $36,280 collect from the CPP may be higher if they begin receiving the retirement pension as early as possible. Any delay in taking the pension will increase the monthly amount but may decrease the total amount collected, as the contributor would receive the payments for a limited period of time (Scenario 1 compared to 2 and 3).

36

• Working part-time and making CPP contributions toward the new PRB after starting the

CPP retirement pension can result in small increases in CPP payments. (Scenario 4).

Sample Case 4

Retiring before or after introduction of the new adjustment factors Retiring before or after introduction of the new adjustment factors

• Ms. Seguin has reached age 60 in 2011. New adjustment factors will be introduced

in 2012. Should she start her retirement pension before the changes occur?

• Ms Seguin’s predicted unadjusted retirement pension is 60% of the maximum
• Ms. Seguin s predicted unadjusted retirement pension is 60% of the maximum.
• Ms. Seguin spent 8 years outside the workforce to care for her young children.
• She is currently employed full-time at 70% of the average industrial wage and plans

to continue working until age 68 or 70, shifting to part-time at age 67.

70% f YMPE fl t i f $33 810 d t ib ti f $1 500 35 – 70% of YMPE reflects earnings of $33,810 and contributions of $1,500.35 – 20% of YMPE reflects earnings of $9,660 and contributions of $304.92

• She is healthy and has an average life expectancy (85).

When to start CPP When to start CPP retirement pension to maximize pension payments?

• Begin receiving CPP

retirement pension at 60

• r 64
• Start CPP retirement

pension at 65 and

• Stop contributing, OR
• Continue working and

contributing until 68.

• Start CPP retirement

37

• Continue working and

contributing until 70. Stop contributing, OR

• Continue working

and contributing until 70. pension at 68 with no further contributions.

Sample Case 4: Scenario 1 Start CPP at 60 continue contributing until 70 Start CPP at 60, continue contributing until 70

• Based on her work history, Ms. Seguin’s unadjusted retirement pension will be

$576.00. As she reaches 60 in 2011, the traditional general drop-out of 15% and the existing reduction factor will apply (i.e. 70% of a full pension). Her actual the existing reduction factor will apply (i.e. 70% of a full pension). Her actual pension at age 60 will be: $576.00 x 70%=$403.20

• Earnings from continuing work (no CPP contributions allowed until 2012):
• The monthly PRB is a separate benefit Each year of contributions results in a

2011 (60) – 70% of YMPE 2014 (63) – 70% YMPE 2017 (66) – 70% YMPE 2020 (69) – 20% YMPE 2012 (61) – 70% YMPE 2015 (64) – 70% YMPE 2018 (67) – 20% YMPE 2021 (70) – $0 2013 (62) – 70% YMPE 2016 (65) – 70% YMPE 2019 (68) – 20% YMPE

• The monthly PRB is a separate benefit. Each year of contributions results in a

new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2011 (60) – $0 2014 (63) – $14 54 2017 (66) – $18 21 2020 (69) – $6 41

• The total monthly pension at age 70 is the sum of all PRBs and the early

2011 (60) $0 2014 (63) $14.54 2017 (66) $18.21 2020 (69) $6.41 2012 (61) – $0 2015 (64) – $15.63 2018 (67) – $19.62 2021 (70) – $6.82 2013 (62) – $13.53 2016 (65) – $16.80 2019 (68) – $6.01

38

The total monthly pension at age 70 is the sum of all PRBs and the early retirement pension taken at 60 = $520.77.

• If Ms. Seguin lives to age 85, the total collected from CPP will be $154,827.

Sample Case 4: Scenario 2 Start CPP at 64 continue contributing until 70 Start CPP at 64, continue contributing until 70

• Continuing to work will increase Ms. Seguin’s unadjusted retirement pension to

$613.01. As she reaches 64 in 2015, the new drop-out of 17% and the new actuarial reduction of 6.96% will apply (pension is 93.04%). Her actual pension at actuarial reduction of 6.96% will apply (pension is 93.04%). Her actual pension at age 64 will be: $613.01 x 93.04%=$570.35

• Suppose earnings from work
• The monthly PRB is a separate benefit Each year of contributions

2015 (64) – 70% of YMPE 2018 (67) – 20% YMPE 2016 (65) – 70% of YMPE 2019 (68) – 20% YMPE 2017 (66) – 70% of YMPE 2020 (69) – 20% YMPE

• The monthly PRB is a separate benefit. Each year of contributions

results in a new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2016 (65) – $16.80 2019 (68) – $6.01

• The total monthly pension at age 70 is the sum of all PRBs and the early

retirement benefit taken at 64 = $644 21

( ) ( ) 2017 (66) – $18.21 2020 (69) – $6.41 2018 (67) – $19.62 2021 (70) – $6.82

39

retirement benefit taken at 64 = $644.21.

• If Ms. Seguin lives to age 85, the total collected from CPP will be

$167,564.

Sample Case 4: Scenario 3 Start CPP at 65 continue contributing until 70 Start CPP at 65, continue contributing until 70

• Continuing to work will increase Ms. Seguin’s unadjusted retirement pension to

$618.05. In 2016, the new 17% drop-out will apply. As she retires at 65, her

2016 (65) – 70% of YMPE 2019 (68) – 20% YMPE 2017 (66) 70% f YMPE 2020 (69) 20% YMPE

p pp y pension will not be adjusted for age.

• Suppose earnings from work
• The monthly PRB is a separate benefit. Each year of contributions results in a

new PRB payable the following year and actuarially adjusted for the age of the

2017 (66) – 70% of YMPE 2020 (69) – 20% YMPE 2018 (67) – 20% YMPE

new PRB, payable the following year and actuarially adjusted for the age of the contributor.

2017 (66) – $18.21 2020 (69) – $6.41 2018 (67) – $19.62 2021 (70) – $6.82 2019 (68) – $6.01

• The total monthly pension at age 70 is the sum of all PRBs and the CPP

retirement benefit taken at 65 = $675.13.

• If life expectancy is 85 years, the total collected from CPP will be $168,509.

40

p y y

Sample Case 4: Scenarios 4 and 5

Scenario 4. Start retirement benefit at 65 with no further contributions.

• Her actual retirement benefit at age 65 will be $618.05 as in Scenario 3.
• If Ms. Seguin lives to age 85, the total collected from CPP will be $155,749.

Scenario 5 Continue contributing until 68 and start retirement benefit at 68 Scenario 5. Continue contributing until 68 and start retirement benefit at 68.

• If she continues to work, her unadjusted retirement pension will now be $665.51.

As she reaches 68 in 2019, the new general drop-out of 17% and the new actuarial increase of 25.2% will apply (i.e. 125.2% of a full pension). Her actual pension at % pp y ( % p ) p age 68 will be: $665.51 x 125.2%=$833.21

• If Ms Seguin lives to age 85 the total collected from CPP will be $179 973

If Ms. Seguin lives to age 85, the total collected from CPP will be $179,973.

41

Sample Case 4: Summary p y

Start CPP at 60 (old actuarial Start CPP at 64 (new actuarial Start CPP at 65 and Start CPP at Continue contributing actuarial factors) and continue contributing until 70. actuarial factors) and continue contributing until 70. 65 and continue contributing until 70. 65 without further contributions. contributing until 68 and start CPP at 68. CPP benefit at time of receipt

$403.20 $570.35 $618.05 $618.05 $833.21

Maximum CPP ( ddi ll

$520 77 $644 21 $675 13 $618 05 $833 21

(adding all PRBs)

$520.77 $644.21 $675.13 $618.05 $833.21

Total collected from the CPP by age 85

$154,827 $167,564 $168,509 $155,749 $179,973

• Contributors should make retirement decisions based on their personal life circumstances,

not simply on the implementation schedule of the new actuarial factors.

• If a contributor is healthy and able to work, the new PRB will increase retirement income.

by age 85 42

If a contributor is healthy and able to work, the new PRB will increase retirement income.

• However, postponing receipt of the CPP retirement pension, especially after age 65, will

produce a larger monthly retirement pension and may increase the total amount collected from the Plan.

Sample Case 5: Ceasing contributing, but postponing receipt of retirement

pension (different life expectancies) pension (different life expectancies)

• Mr. Mazur will reach 60 in 2016. New adjustment factors will be fully

introduced.

• Mr. Mazur had some career interruptions and in 2016 his predicted

unadjusted retirement pension will be 75% of the maximum.

• He is planning to permanently stop working at age 60.
• Assuming his life expectancy is average (85) below average (76) or above
• Assuming his life expectancy is average (85), below average (76) or above

average (93)…

When to start CPP retirement pension to maximize pension payments? pension payments?

• Take CPP retirement

pension at age 60

• Take CPP retirement

pension at age 62 or 65

• Take CPP retirement

pension at age 70

43

Sample Case 5 Stop work at 60 start CPP at 60 or 62 Stop work at 60, start CPP at 60 or 62

Scenario 1

• Based on his work history, Mr. Mazur’s unadjusted retirement pension at age 60 will be

$720 00 A h ill h 60 i 2016 th l d t i 17% d th d ti $720.00. As he will reach 60 in 2016, the general drop-out is 17% and the new reduction factor applies (64.0% of a full pension). His actual pension at 60 will be: $720.00 x 64.0%=$460.80

• If he lives to age 76 the total collected from the CPP will be $94 003
• If he lives to age 76, the total collected from the CPP will be $94,003.
• If he lives to age 85, the total collected from the CPP will be $143,769.
• If he lives to age 93, the total collected from the CPP will be $188,006.

Scenario 2

• If he stops working at 60, but postpones starting the CPP retirement pension until 62, the

unadjusted retirement pension would be $687.27 (years of zero earnings at the end of contributory period reduce the pension). As he will reach 62 in 2018, the new drop-out of 17% and the new reduction factor will apply (i.e. 78.4% of a full pension). His actual pension at pp y ( p ) p age 62 will be: $687.27 x 78.4%=$538.82

• If he lives to age 76, the total collected from the CPP will be $96,987.

44

• If he lives to age 85, the total collected from the CPP will be $155,180.
• If he lives to age 93, the total collected from the CPP will be $206,907.

Sample Case 5 Stop work at 60 take up CPP at 65 or 70 Stop work at 60, take up CPP at 65 or 70

Scenario 3

• If Mr. Mazur stops working at age 60, but postpones starting the CPP retirement pension until

65 hi dj t d ti t i t 65 ill b $643 40 ( f i t 65, his unadjusted retirement pension at age 65 will be $643.40 (years of zero earnings at the end of contributory period reduce the pension). As he will reach age 65 in 2021, the general drop-out is 17%. Since he starts the pension at 65, there is no adjustment up or

• down. His actual pension at age 65 will be:

$643.40 x 100%=$643.40

• If he lives to age 76, the total collected from the CPP will be $92,650.
• If he lives to age 85, the total collected from the CPP will be $162,137.
• If he lives to age 93 the total collected from the CPP will be $223 904
• If he lives to age 93, the total collected from the CPP will be $223,904.

Scenario 4

• If he stops working at 60, but postpones taking the CPP retirement pension until age 70, the

unadjusted retirement pension will be $643.40. As he will reach 70 in 2026, the general drop- j p $ , g p

• ut is 17% and the new actuarial increase will apply (i.e. 142% of a full pension). His actual

pension at age 70 will be: $643.40 x 142%=$913.63

• If he lives to age 76, the total collected from the CPP will be $76,745.

45

g , $ ,

• If he lives to age 85, the total collected from the CPP will be $175,417.
• If he lives to age 93, the total collected from the CPP will be $263,126.

Sample Case 5: Summary p y

Client stopped working at age 60 Start CPP at 60 Start CPP at 62 Start CPP at 65 Start CPP at 70 CPP benefit at CPP benefit at time of receipt

$460.80 $538.82 $643.40 $913.63

Total collected from the CPP by age 76 (below average life

$94,003 $96,987 $92,650 $76,745

(below average life expectancy) Total collected from the CPP by age 85 (average life t )

$143,769 $155,180 $162,137 $175,417

expectancy) Total collected from the CPP by age 93 (above average life expectancy)

$188,006 $206,907 $223,904 $263,126

• A contributor who postpones applying for the CPP retirement pension until age 70 will receive

approximately double the monthly benefit they would have received had they started the pension at age 60 (as of 2016), if they do not continue to work after age 60. (First row)

• However, if the contributor’s lifespan is below average, the maximum pension (age 70) would not lead

to the highest total amount collected from the CPP. (Second row)

p y)

46 to the highest total amount collected from the CPP. (Second row)

• If the contributor has an average or above average lifespan, the bigger pension taken at age 70 would

lead to a higher total amount collected from the Plan. (Third and fourth rows)

• Taking the pension at age 60 in the majority of cases would lead to the minimum total amount

collected from the Plan.

Methodology gy

• The preceding examples provide comparisons of pension benefits valued in

constant 2011 dollars. The calculations are based on fixing the Year’s M i P i bl E i (YMPE) d i ti t i t Maximum Pensionable Earnings (YMPE) and maximum retirement pension to their 2011 values.

– YMPE (2011) is $48,300 and the maximum monthly unadjusted retirement pension is $960.00 The maximum annual contribution for employees in 2011 is $2 217 60 – The maximum annual contribution for employees in 2011 is $2,217.60

• The comparison of the net present value (NPV) of future benefits is not

provided, as: – The YMPE is indexed annually according to average wage growth. – The future YMPE and the maximum CPP retirement pension in the year the pension starts would be taken into consideration while calculating an individual’s pension; therefore the actual pensions will be of higher dollar individual’s pension; therefore, the actual pensions will be of higher dollar value than indicated in the examples provided here.

• Therefore, constant 2011 dollars are a good proxy of the NPV of future

b fit

47

benefits.

Annex

Calculation Tables

48

Calculating CPP Retirement Pension g

• In 2011, contributions are paid on earnings between $3,500, the Year’s Basic

Exemption (YBE), and $48,300, the Year’s Maximum Pensionable Earnings (YMPE).

• Assuming a contributor, aged 65, began contributing to the CPP at its inception in 1966

g , g , g g p and is retiring sometime in 2010. Step 1 Determine average YMPE over last five years, including year of retirement. Add the YMPE for the year 2011 and each YMPE for the four previous years, then divide by five: five: $48,300 + $47,200 + $46,300 + $44,900 + $43,700 = $230,400 $230,400 / 5 = $46,080 The five-year average of the YMPE is called MPEA (Maximum Pensionable Earnings Average) and for the year 2011 is $46,080. Earnings Average) and for the year 2011 is $46,080. Step 2 Convert the earnings for each year since 1966 into 2010 dollars. Suppose the person had earnings of $5,200 in 1978. The YMPE in that year was $10,400. To convert the earnings to 2010 dollars, you look at the relationship of the amounts: $ $ $5,200 is to $10,400 As X is to MPEA (that is $46,080) So $5,200 in 1978 dollars is the same as $23,040 in 2011 dollars. Repeat this calculation for each year in the contributory period in which contributions were made from 1966 to 2011

49

were made from 1966 to 2011.

Calculating CPP Retirement Pension (cont.) g ( )

Step 3 Once all the earnings are in 2011 dollars identify and eliminate from the Once all the earnings are in 2011 dollars, identify and eliminate from the calculation of the pension the 15 percent of the years with low or no earnings (e.g. due to periods of education, unemployment, etc.). In this example, approximately 7 of the 45 years in the contributory period are eliminated. Step 4 Add the earnings (in 2011 dollars) for each of the remaining 38 years, and divide the total by 38. The result is the yearly average pensionable earnings in 2011 dollars in 2011 dollars. Step 5 Multiply the yearly average pensionable earnings by 0.25 (the CPP pension replaces up to 25 percent of the average industrial wage) For the monthly replaces up to 25 percent of the average industrial wage). For the monthly pension payment, divide the product by 12. If the contributor’s average pensionable earnings were $37,600, the contributor’s monthly pension would be calculated as follows:

50

$37,600 X 0.25 = $9,400 per year $9,400 / 12 = $783.33 per month.

Calculating new Post-Retirement Benefit (PRB) g ( )

• The new benefit maximum amount is equal to 1/40th of the maximum CPP

retirement pension for the year in pay.

• Thus, someone with earnings of half of YMPE would receive a PRB of one half of 1/40th of

maximum pension.

• Each year’s PRB is considered its own “new” benefit, and is subject to the

actuarial adjustment based on the recipient’s age on January 1 of the year following the year in which contributions were made.

• The formula for calculating a (monthly) PRB based on earnings in 2012 is:

The formula for calculating a (monthly) PRB based on earnings in 2012 is:

[PE(2012)/YMPE(2012)] x 1/40 x 25% x MPEA(2013) x AAF(1-Jan-2013) /12, where:

PE = Pensionable Earnings YMPE = Year’s Maximum Pensionable Earnings MPEA = Maximum Pensionable Earnings Average (25% of this amount is maximum pension for the year)

51

p y ) AAF = Actuarial Adjustment factor at age on 1 January 2013.

PRB Calculation Example p

• Consider the case of Mr. Lee, who took up his retirement pension at age 60 in

2007, and had $50,000 of earnings in 2012. , $ , g

• The formula for calculating Mr. Lee’s new monthly (2013) PRB is as follows:

[(A/B) × C × D × E] / 12 = $28.02/month Where:

A= Pensionable Earnings (2012) = $49,600 (Can’t exceed YMPE) B=YMPE (2012) = $49,600 (Projection from 24th Actuarial Report on the CPP) C= 0.00625 (1/40 x 25%) ( ) D= MPEA (2013) = $48,380 (Projection from 24th Actuarial Report on the CPP) E= Actuarial Adjustment Factor = 1.112

• Mr. Lee is 66.25 on 1 January 2013, subject to 16 months of adjustment
• 16 x 0.007 = 0.112
• 1 + 0.112 = 1.112

Adding those values to the formula: [($49 600/$49 600) x 0 00625 x $48 380 x 1 112]/12 = $28 02/month

52

[($49,600/$49,600) x 0.00625 x $48,380 x 1.112]/12 $28.02/month

Pension calculation table for 2010 (adjustment factors:

• 0 5% per month before 65 +0 5% per month after 65)
• 0.5% per month before 65, +0.5% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 70% 76% 82% 88% 94% 100% 106% 112% 118% 124% 130% 70.50% 76.50% 82.50% 88.50% 94.50% 100.50% 106.50% 112.50% 118.50% 124.50% 71% 77% 83% 89% 95% 101% 107% 113% 119% 125% 71% 77% 83% 89% 95% 101% 107% 113% 119% 125% 71.50% 77.50% 83.50% 89.50% 95.50% 101.50% 107.50% 113.50% 119.50% 125.50% 72% 78% 84% 90% 96% 102% 108% 114% 120% 126% 72.50% 78.50% 84.50% 90.50% 96.50% 102.50% 108.50% 114.50% 120.50% 126.50% 73% 79% 85% 91% 97% 103% 109% 115% 121% 127% 73 50% 79 50% 85 50% 91 50% 97 50% 103 50% 109 50% 115 50% 121 50% 127 50% 73.50% 79.50% 85.50% 91.50% 97.50% 103.50% 109.50% 115.50% 121.50% 127.50% 74% 80% 86% 92% 98% 104% 110% 116% 122% 128% 74.50% 80.50% 86.50% 92.50% 98.50% 104.50% 110.50% 116.50% 122.50% 128.50%

53

75% 81% 87% 93% 99% 105% 111% 117% 123% 129% 75.50% 81.50% 87.50% 93.50% 99.50% 105.50% 111.50% 117.50% 123.50% 129.50% Multiplier for the pension amount for each month between 60 and 70th birthdays

Pension calculation table for 2011 (adjustment factors : 0 5% per month before 65 [notice period] +0 57% per month after 65)

• 0.5% per month before 65 [notice period], +0.57% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 70% 76% 82% 88% 94% 100% 106.84% 113.68% 120.52% 127.36% 134.20% 70.50% 76.50% 82.50% 88.50% 94.50% 100.57% 107.41% 114.25% 121.09% 127.93% 71% 77% 83% 89% 95% 101 14% 107 98% 114 82% 121 66% 128 50% 71% 77% 83% 89% 95% 101.14% 107.98% 114.82% 121.66% 128.50% 71.50% 77.50% 83.50% 89.50% 95.50% 101.71% 108.55% 115.39% 122.23% 129.07% 72% 78% 84% 90% 96% 102.28% 109.12% 115.96% 122.80% 129.64% 72.50% 78.50% 84.50% 90.50% 96.50% 102.85% 109.69% 116.53% 123.37% 130.21% 73% 79% 85% 91% 97% 103.42% 110.26% 117.10% 123.94% 130.78% 73.50% 79.50% 85.50% 91.50% 97.50% 103.99% 110.83% 117.67% 124.51% 131.35% 74% 80% 86% 92% 98% 104.56% 111.40% 118.24% 125.08% 131.92% 74.50% 80.50% 86.50% 92.50% 98.50% 105.13% 111.97% 118.81% 125.65% 132.49% 75% 81% 87% 93% 99% 105 70% 112 54% 119 38% 126 22% 133 06%

54

75% 81% 87% 93% 99% 105.70% 112.54% 119.38% 126.22% 133.06% 75.50% 81.50% 87.50% 93.50% 99.50% 106.27% 113.11% 119.95% 126.79% 133.63% Multiplier for the pension amount for each month between 60 and 70th birthdays

Pension calculation table for 2012 (adjustment factors: 0 52% per month before 65 +0 64% per month after 65)

• 0.52% per month before 65, +0.64% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 60 6 6 63 6 65 66 6 68 69 68.80% 75.04% 81.28% 87.52% 93.76% 100% 107.68% 115.36% 123.04% 130.72% 138.40% 69.32% 75.56% 81.80% 88.04% 94.28% 100.64% 108.32% 116.00% 123.68% 131.36% 69.84% 76.08% 82.32% 88.56% 94.80% 101.28% 108.96% 116.64% 124.32% 132.00% 70.36% 76.60% 82.84% 89.08% 95.32% 101.92% 109.60% 117.28% 124.96% 132.64% 70.88% 77.12% 83.36% 89.60% 95.84% 102.56% 110.24% 117.92% 125.60% 133.28% 71.40% 77.64% 83.88% 90.12% 96.36% 103.20% 110.88% 118.56% 126.24% 133.92% 71.92% 78.16% 84.40% 90.64% 96.88% 103.84% 111.52% 119.20% 126.88% 134.56% 72 44% 78 68% 84 92% 91 16% 97 40% 104 48% 112 16% 119 84% 127 52% 135 20% 72.44% 78.68% 84.92% 91.16% 97.40% 104.48% 112.16% 119.84% 127.52% 135.20% 72.96% 79.20% 85.44% 91.68% 97.92% 105.12% 112.80% 120.48% 128.16% 135.84% 73.48% 79.72% 85.96% 92.20% 98.44% 105.76% 113.44% 121.12% 128.80% 136.48%

55

74.00% 80.24% 86.48% 92.72% 98.96% 106.40% 114.08% 121.76% 129.44% 137.12% 74.52% 80.76% 87.00% 93.24% 99.48% 107.04% 114.72% 122.40% 130.08% 137.76% Multiplier for the pension amount for each month between 60 and 70th birthdays

Pension calculation table for 2013 (adjustment factors: 0 54% per month before 65 +0 7% per month after 65)

• 0.54% per month before 65, +0.7% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 67.6% 74.08% 80.56% 87.04% 93.52% 100% 108.4% 116.8% 125.2% 133.6% 142% 68.14% 74.62% 81.1% 87.58% 94.06% 100.7% 109.1% 117.5% 125.9% 134.3% 68 68% 75 16% 81 64% 88 12% 94 60% 101 4% 109 8% 118 2% 126 6% 135% 68.68% 75.16% 81.64% 88.12% 94.60% 101.4% 109.8% 118.2% 126.6% 135% 69.22% 75.7% 82.18% 88.66% 95.14% 102.1% 110.5% 118.9% 127.3% 135.7% 69.76% 76.24% 82.72% 89.2% 95.68% 102.8% 111.2% 119.6% 128% 136.4% 70.3% 76.78% 83.26% 89.74% 96.22% 103.5% 111.9% 120.3% 128.7% 137.1% 70.84% 77.32% 83.8% 90.28% 96.76% 104.2% 112.6% 121% 129.4% 137.8% 71.38% 77.86% 84.34% 90.82% 97.3% 104.9% 113.3% 121.7% 130.1% 138.5% 71.92% 78.4% 84.88% 91.36% 97.84% 105.6% 114% 122.4% 130.8% 139.2% 72.46% 78.94% 85.42% 91.9% 98.38% 106.3% 114.7% 123.1% 131.5% 139.9% 73% 79 48% 85 96% 92 44% 98 92% 107% 115 4% 123 8% 132 2% 140 6%

56

73% 79.48% 85.96% 92.44% 98.92% 107% 115.4% 123.8% 132.2% 140.6% 73.54% 80.02% 86.50% 92.98% 99.46% 107.7% 116.1% 124.5% 132.9% 141.3% Multiplier for the pension amount for each month between 60 and 70th birthdays

Pension calculation table for 2014 (adjustment factors: 0 56% per month before 65 +0 7% per month after 65)

• 0.56% per month before 65, +0.7% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 66.40% 73.12% 79.84% 86.56% 93.28% 100% 108.4% 116.8% 125.2% 133.6% 142% 66.96% 73.68% 80.40% 87.12% 93.84% 100.7% 109.1% 117.5% 125.9% 134.3% 67 52% 74 24% 80 96% 87 68% 94 40% 101 4% 109 8% 118 2% 126 6% 135% 67.52% 74.24% 80.96% 87.68% 94.40% 101.4% 109.8% 118.2% 126.6% 135% 68.08% 74.80% 81.52% 88.24% 94.96% 102.1% 110.5% 118.9% 127.3% 135.7% 68.64% 75.36% 82.08% 88.80% 95.52% 102.8% 111.2% 119.6% 128% 136.4% 69.20% 75.92% 82.64% 89.36% 96.08% 103.5% 111.9% 120.3% 128.7% 137.1% 69.76% 76.48% 83.20% 89.92% 96.64% 104.2% 112.6% 121% 129.4% 137.8% 70.32% 77.04% 83.76% 90.48% 97.20% 104.9% 113.3% 121.7% 130.1% 138.5% 70.88% 77.60% 84.32% 91.04% 97.76% 105.6% 114% 122.4% 130.8% 139.2% 71.44% 78.16% 84.88% 91.60% 98.32% 106.3% 114.7% 123.1% 131.5% 139.9% 72 00% 78 72% 85 44% 92 16% 98 88% 107% 115 4% 123 8% 132 2% 140 6%

57

72.00% 78.72% 85.44% 92.16% 98.88% 107% 115.4% 123.8% 132.2% 140.6% 72.56% 79.28% 86.00% 92.72% 99.44% 107.7% 116.1% 124.5% 132.9% 141.3% Multiplier for the pension amount for each month between 60 and 70th birthdays

Pension calculation table for 2015 (adjustment factors: 0 58% per month before 65 +0 7% per month after 65)

• 0.58% per month before 65, +0.7% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 65.20% 72.16% 79.12% 86.08% 93.04% 100% 108.4% 116.8% 125.2% 133.6% 142% 65.78% 72.74% 79.70% 86.66% 93.62% 100.7% 109.1% 117.5% 125.9% 134.3% 66 36% 73 32% 80 28% 87 24% 94 20% 101 4% 109 8% 118 2% 126 6% 135% 66.36% 73.32% 80.28% 87.24% 94.20% 101.4% 109.8% 118.2% 126.6% 135% 66.94% 73.90% 80.86% 87.82% 94.78% 102.1% 110.5% 118.9% 127.3% 135.7% 67.52% 74.48% 81.44% 88.40% 95.36% 102.8% 111.2% 119.6% 128% 136.4% 68.10% 75.06% 82.02% 88.98% 95.94% 103.5% 111.9% 120.3% 128.7% 137.1% 68.68% 75.64% 82.60% 89.56% 96.52% 104.2% 112.6% 121% 129.4% 137.8% 69.26% 76.22% 83.18% 90.14% 97.10% 104.9% 113.3% 121.7% 130.1% 138.5% 69.84% 76.80% 83.76% 90.72% 97.68% 105.6% 114% 122.4% 130.8% 139.2% 70.42% 77.38% 84.34% 91.30% 98.26% 106.3% 114.7% 123.1% 131.5% 139.9% 71 00% 77 96% 84 92% 91 88% 98 84% 107% 115 4% 123 8% 132 2% 140 6%

58

71.00% 77.96% 84.92% 91.88% 98.84% 107% 115.4% 123.8% 132.2% 140.6% 71.58% 78.54% 85.50% 92.46% 99.42% 107.7% 116.1% 124.5% 132.9% 141.3% Multiplier for the pension amount for each month between 60 and 70th birthdays

Pension calculation table for 2016 (adjustment factors: 0 6% per month before 65 +0 7% per month after 65)

• 0.6% per month before 65, +0.7% per month after 65)

AGE 60 61 62 63 64 65 66 67 68 69 70 64% 71.2% 78.4% 85.6% 92.8% 100% 108.4% 116.8% 125.2% 133.6% 142% 64.60% 71.8% 79% 86.2% 93.4% 100.7% 109.1% 117.5% 125.9% 134.3% 65 2% 72 4% 79 6% 86 8% 94% 101 4% 109 8% 118 2% 126 6% 135% 65.2% 72.4% 79.6% 86.8% 94% 101.4% 109.8% 118.2% 126.6% 135% 65.8% 73% 80.2% 87.4% 94.6% 102.1% 110.5% 118.9% 127.3% 135.7% 66.4% 73.6% 80.8% 88% 95.2% 102.8% 111.2% 119.6% 128% 136.4% 67% 74.2% 81.4% 88.6% 95.8% 103.5% 111.9% 120.3% 128.7% 137.1% 67.6% 74.8% 82% 89.2% 96.4% 104.2% 112.6% 121% 129.4% 137.8% 68.2% 75.4% 82.6% 89.8% 97% 104.9% 113.3% 121.7% 130.1% 138.5% 68.8% 76% 83.2% 90.4% 97.6% 105.6% 114% 122.4% 130.8% 139.2% 69.4% 76.6% 83.8% 91% 98.2% 106.3% 114.7% 123.1% 131.5% 139.9% 70% 77 2% 84 4% 91 6% 98 8% 107% 115 4% 123 8% 132 2% 140 6%

59

70% 77.2% 84.4% 91.6% 98.8% 107% 115.4% 123.8% 132.2% 140.6% 70.6% 77.8% 85% 92.2% 99.4% 107.7% 116.1% 124.5% 132.9% 141.3% Multiplier for the pension amount for each month between 60 and 70th birthdays