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The terms below appear in bold type in the guide.
ACTUARY - A professional in the pension area who is responsible for calculating the liabilities of pension plans and the costs of providing pension plan benefits. In Canada, a person must be a member of the Canadian Institute of Actuaries (CIA) to be recognized as a professional actuary.
ANNUITY - A contract purchased from an insurance company to provide periodic (usually monthly) payments to a person for his or her lifetime.
BRIDGE BENEFIT - A bridge benefit usually provides income from the date the member takes early retirement to the date when the member is entitled to receive Canada Pension Plan (CPP) or Quebec Pension Plan retirement benefits and/or Old Age Security benefits.
CANSIM (Canadian Socio-economic Information Management) - Compiled by Statistics Canada and published in the Bank of Canada Review in the CANSIM system. Information on CANSIM rates can be obtained from Statistics Canada (www.statcan.ca) or from the Bank of Canada (www.bank-banque-canada.ca).
COMMON-LAW PARTNER - A person who is living in a conjugal relationship with the individual.
COMMUTED VALUE - The amount of an immediate lump-sum payment estimated to be equal in value to a future series of payments.
CONTINUOUS SERVICE - The period during which an employee is continuously employed by the same employer. Continuous service may be defined in the pension plan (or by law) to include certain periods of absence and/or service with an associated or former employer.
DEFERRED PENSION - A specified pension determined when a member's employment or plan terminates that is not payable until pensionable age.
DEFINED BENEFIT PLAN - A pension plan that defines the pension benefit to be provided, based on years of plan membership, average earnings, etc., in accordance with the terms of the plan.
DEFINED CONTRIBUTION PLAN - A pension plan that defines the amount of employer and employee contributions to the pension fund, determined on an individual account basis. Also known as a money purchase pension plan. The benefit the member will receive on retirement is calculated at the date of retirement and is based on accumulated contributions and investment income.
GUARANTEED ANNUITY - An annuity that will be paid to a person for his or her lifetime, with a minimum number of payments guaranteed. For example, if a person who owns an annuity that has a five-year guarantee dies after three years, payment will continue to the survivor or the estate for two years.
INCLUDED EMPLOYMENT - Employment in connection with the operation of any work, undertaking or business that is subject to the legislative authority of the Government of Canada, such as banking, shipping, radio, television, etc.
JOINT AND SURVIVOR ANNUITY - An annuity payable for the lifetimes of both the plan member and his or her spouse or common-law partner. This is required to be provided as an option when a member retires. Payments to the survivor are usually reduced by 40 per cent after the member's death.
LIF - See Life Income Fund.
LIFE INCOME FUND (LIF) - A personal retirement income fund offered by financial institutions. Similar to a Registered Retirement Income Fund (RRIF). A LIF can be purchased with pension funds when a member leaves or retires. A federal LIF is used to provide a regular retirement income, and is subject to minimum and maximum withdrawal limits. LIFs are governed by the Pension Benefits Standards Act, 1985 and the Income Tax Act (Canada) (Income Tax Act).
LOCKED-IN REGISTERED RETIREMENT SAVINGS PLAN - A personal retirement savings account offered by financial institutions. Similar to a Registered Retirement Savings Plan (RRSP), except that it is locked in. A locked-in RRSP is used to hold money that is transferred out of a pension fund on termination of employment. Locked-in RRSPs are governed by the Pension Benefits Standards Act, 1985 and the Income Tax Act.
LOCKING-IN - A legislative requirement whereby pension benefits cannot be used for any purpose other than to provide a retirement pension. Also applies to LIFs and Locked-in Registered Retirement Savings Plans.
MONEY PURCHASE PENSION PLAN - See Defined Contribution Plan.
PENSION ADJUSTMENT (PA) - The value of a person's pension benefits accruing in a particular year as defined by Canada Customs and Revenue Agency. For defined benefit plans, the PA is determined by a formula. For defined contribution plans, the PA is the total of all employer and employee contributions for the year. A person's RRSP contribution room is reduced by the value of the previous year's PA.
PENSION BENEFITS STANDARDS ACT, 1985 (PBSA) - The law regulating private pension plans of employees employed in areas of included employment in Canada. It sets out minimum standards for benefits, administration, information to members, and investments.
PENSION BENEFITS STANDARDS REGULATIONS, 1985< (Regulations) - Regulations that support the PBSA and provide additional specifications.
PLAN TERMINATION - See Wind-up.
PORTABILITY OPTIONS - Options available on termination, death, marriage breakdown, or when a plan winds up. An individual may transfer the commuted value of accumulated pension benefits to a Locked-in RRSP or a LIF, or to another pension plan, if agreed to by the new plan. The commuted value may also be used to purchase an immediate or deferred annuity. A member may choose to forego these options and instead receive a deferred pension from the plan at retirement.
PRIVATE/EMPLOYMENT PENSION PLAN - An employer- and/or union-sponsored plan that provides a regular income for a retired member's lifetime and that of his or her survivor. This term includes plans covering both public- and private-sector employees, but does not include the Canada Pension Plan or other public programs.
REGISTERED RETIREMENT INCOME FUND (RRIF) - A personal retirement income fund offered by financial institutions. A RRIF is used to provide an ongoing minimum flow of income. The minimum withdrawal amounts are determined by the Income Tax Act. RRIFs are governed by the Income Tax Act. Transfers to RRIFs from federally registered pension plans are not permitted.
REGISTERED RETIREMENT SAVINGS PLAN (RRSP) - A personal retirement savings account offered by financial institutions, to a specified amount. RRSP contributions can be d educted from an individual's taxable income. RRSPs are governed by the Income Tax Act.
RRSP - See Registered Retirement Savings Plan.
RRIF - See Registered Retirement Income Fund.
SPOUSE - The spouse is a person married to the member or former member or who is party to a void marriage.
SURVIVOR - The common-law partner of the member or former member; otherwise, the spouse.
VESTED BENEFITS (VESTING) - Benefits to which an employee is entitled under a pension plan by satisfying age and/or service requirements. Usually involves locking in of accumulated benefits.
WIND-UP - Discontinuation of all or part of a pension plan by the employer. Often results from bankruptcy of the employer or from corporate restructuring or downsizing.
YEAR'S MAXIMUM PENSIONABLE EARNINGS (YMPE) - The earnings on which Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contributions and benefits are calculated. YMPE changes each year according to a formula using average wage levels. YMPE is published annually by the Canada Customs and Revenue Agency. For 1999, the YMPE was $37,400.
Information on the Old Age Security Program and the Canada Pension Plan
The retirement income system in Canada is a blend of mandatory and voluntary arrangements. It divides responsibility for the provision of retirement income among governments, employers, unions, and individuals.
Public pension plans form the foundation on which all retirement planning is built. These plans include the Old Age Security Program, the Canada Pension Plan which is administered by Human Resources Development Canada, and the Quebec Pension Plan which is administered by the Quebec Pension Board.
Old Age Security Program (OAS)
The Old Age Security basic pension is a monthly payment that is paid to people who are 65 years of age and over who meet the residency requirements. If, for whatever reason, you are unable to save for your retirement, the Government of Canada also provides the Guaranteed Income Supplement (GIS), which is family income-tested benefit that goes to low-income OAS pensioners. Spouses' Allowance benefits are also available to low-income 60-64 year olds who are married to GIS recipients or who have been widowed.
Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) provides you or your dependants with some financial protection if you become disabled, or when you retire or die. The amount of your CPP benefits depends on how much and for how long you contribute. The federal and provincial governments jointly manage the CPP. The CPP operates in every province and territory except Quebec, which has a similar pension program, the Quebec Pension Plan (QPP).
For information on the OAS or CPP, call Human Resources Development Canada free of charge at 1-800-277-9914 (English); 1-800-277-9915 (French). If you have a hearing or speech impairment and you use a TDD/TTY device, please call 1-800-255-4786. Visit their website at www.hrdc-drhc.gc.ca/isp. |