Pension Basics
Pension Basics
Whether you’re just starting your career or nearing retirement, your pension plan helps you build financial security for the future. Let’s break down how it works and the benefits it provides.
Defined Benefit Pension
CSSB offers a defined benefit pension plan. This means your pension is calculated using a formula. The formula considers a few key factors. These include your years of service and the average of your five highest-earning years.
When you retire, we use the formula to determine your fixed monthly income. This is why it’s called a defined benefit: the amount (benefit) is set (defined).
This is different from a defined contribution plan or an RRSP. In these plans, your retirement income depends on how much you contribute and how your investments perform. It is up to you to manage your savings and make them last.
With your plan, a defined benefit plan, you’ll get monthly payments for life. This means you’ll never worry about outliving your money and you can plan for retirement with confidence.
Good to know
- Most members get back their contributions with interest within three to four years of retiring.
- There is no vesting or waiting period. You’re entitled to your full pension (including your employer’s share) right away.
- Contributions are tax deductible and reflected on your T4 statement.
- The pension adjustment on T4 statement reduces your RRSP room.
- You can only access your funds at retirement or when you leave the plan.
- You can’t make additional contributions.
Pension plan formula – how your pension is calculated
When you retire, the pension formula calculates how much income you’ll receive. The amount doesn’t depend on your savings or investments. Instead, it’s based on your years of pensionable service and your five highest earning years.
Here’s what the formula considers:
Pensionable service: The time you’ve worked while contributing to the pension plan.
Pensionable earnings: The average of your five highest-earning years (these do not have to be back to back).
2%
x
average best five years pensionable earnings
x
pensionable service
MINUS
0.4%
x
average of the CPP earnings based on the same five years
x
pensionable service
=
Annual Pension
Example – pension calculation
Retirement date: December 31, 2025
Employee Age: 55
Pensionable service: 30 years
Average pensionable earnings: $70,600
Average CPP pensionable earnings: $66,580
.02 x $70,600 x 30 = $42,360.00
Less: .004 x $66,580 x 30 = $7,989.60
Annual pension = $34,370.40
Monthly Pension = $2,864.20*
*Lifetime pension option and assumes no early retirement reduction (Rule of 80).
Contribution rates
Pension contributions are deducted from your pensionable earnings and your employer is responsible for their share.
You’ll contribute 8% of your salary up to a limit called the CPP maximum or the Year’s Maximum Pensionable Earnings (YMPE), set each year by the federal government.
On income over the CPP maximum, you contribute 9%.
Example of pensionable earnings of $78,000
8%
on salary up to
$71,300
(2025 Canada Pension Plan Maximum)
$5,704
+
9%
on salary above
$71,300 ($6,700)
(earnings over Canada Pension Plan Maximum)
$603
=
$6,307
Total in 2025
Benefits of your pension
In addition to monthly income for life, your pension offers many other benefits.
No investment decisions to make
With a team of experts managing your investments, you can trust the portfolio is in capable hands. Our team focuses on maximizing returns while carefully managing risk. This is all carried out within well-defined guidelines that are overseen by the Board.
Maintain buying power
While not guaranteed, your pension is partially indexed to inflation, meaning you are likely to enjoy some pension increases throughout your retirement. This ensures you don’t lose as much buying power as prices go up.
Protection for loved ones
When you retire, you can select a pension payment option that provides income for your spouse, partner, or another beneficiary if you pass away first. Pension benefits are also payable if you die before retirement.
Financial security during illness or disability
If you’ve been in the plan for 10 years and can’t work due to illness or disability, you may qualify for early pension payments. If you return to work, these payments don’t affect your benefit at retirement.
Flexibility if you change jobs or employers
If you get a new job or change employers, you can explore several options such as transferring the pension to your new employer or leaving your funds with CSSB until you’re ready to retire.
Membership – who can join
Joining the plan depends on your employment status.
Automatic enrollment
Permanent full-time and part-time employees (working 50% or more)
Once you complete your registration form, your employer will take care of the details. You are a member starting from your first day of permanent employment.
Part-time, casual, departmental, or others who have reached 25% of the CPP maximum in two back-to-back years
Example: In 2023, the maximum was $66,600. In 2024, the maximum was $68,500. A term employee making at least $16,650 in 2023 and at least $17,125 in 2024 would be automatically enrolled. (CRA sets the CPP maximum.)
Term employee
You are enrolled when you have completed one year of service or reached 25% of the CPP maximum in two back-to-back years, whichever happens earlier.
Optional enrollment
Term full-time, term part-time, part-time (working less than 50%), seasonal, and casual employees
Enrollment is not automatic but you can sign a Notice of Desire form to start building your retirement benefits now. Ask your HR or payroll department for help. Don’t miss out.
Resources
Pension Basics
Whether you’re just starting your career or nearing retirement, your pension plan helps you build financial security for the future. Let’s break down how it works and the benefits it provides.
Defined Benefit Pension
CSSB offers a defined benefit pension plan. This means your pension is calculated using a formula. The formula considers a few key factors. These include your years of service and the average of your five highest-earning years.
When you retire, we use the formula to determine your fixed monthly income. This is why it’s called a defined benefit: the amount (benefit) is set (defined).
This is different from a defined contribution plan or an RRSP. In these plans, your retirement income depends on how much you contribute and how your investments perform. It is up to you to manage your savings and make them last.
With your plan, a defined benefit plan, you’ll get monthly payments for life. This means you’ll never worry about outliving your money and you can plan for retirement with confidence.
Good to know
- Most members get back their contributions with interest within three to four years of retiring.
- There is no vesting or waiting period. You’re entitled to your full pension (including your employer’s share) right away.
- Contributions are tax deductible and reflected on your T4 statement.
- The pension adjustment on T4 statement reduces your RRSP room.
- You can only access your funds at retirement or when you leave the plan.
- You can’t make additional contributions.
Pension plan formula – how your pension is calculated
When you retire, the pension formula calculates how much income you’ll receive. The amount doesn’t depend on your savings or investments. Instead, it’s based on your years of pensionable service and your five highest earning years.
Here’s what the formula considers:
Pensionable service: The time you’ve worked while contributing to the pension plan.
Pensionable earnings: The average of your five highest-earning years (these do not have to be back to back).
2%
x
average best five years pensionable earnings
x
pensionable service
MINUS
0.4%
x
average of the CPP earnings based on the same five years
x
pensionable service
=
Annual Pension
Example – pension calculation
Retirement date: December 31, 2025
Employee Age: 55
Pensionable service: 30 years
Average pensionable earnings: $70,600
Average CPP pensionable earnings: $66,580
.02 x $70,600 x 30 = $42,360.00
Less: .004 x $66,580 x 30 = $7,989.60
Annual pension = $34,370.40
Monthly Pension = $2,864.20*
*Lifetime pension option and assumes no early retirement reduction (Rule of 80).
Contribution rates
Pension contributions are deducted from your pensionable earnings and your employer is responsible for their share.
You’ll contribute 8% of your salary up to a limit called the CPP maximum or the Year’s Maximum Pensionable Earnings (YMPE), set each year by the federal government.
On income over the CPP maximum, you contribute 9%.
Example of pensionable earnings of $78,000
8%
on salary up to
$71,300
(2025 Canada Pension Plan Maximum)
$5,704
+
9%
on salary above
$71,300 ($6,700)
(earnings over Canada Pension Plan Maximum)
$603
=
$6,307
Total in 2025
Benefits of your pension
In addition to monthly income for life, your pension offers many other benefits.
No investment decisions to make
With a team of experts managing your investments, you can trust the portfolio is in capable hands. Our team focuses on maximizing returns while carefully managing risk. This is all carried out within well-defined guidelines that are overseen by the Board.
Maintain buying power
While not guaranteed, your pension is partially indexed to inflation, meaning you are likely to enjoy some pension increases throughout your retirement. This ensures you don’t lose as much buying power as prices go up.
Protection for loved ones
When you retire, you can select a pension payment option that provides income for your spouse, partner, or another beneficiary if you pass away first. Pension benefits are also payable if you die before retirement.
Financial security during illness or disability
If you’ve been in the plan for 10 years and can’t work due to illness or disability, you may qualify for early pension payments. If you return to work, these payments don’t affect your benefit at retirement.
Flexibility if you change jobs or employers
If you get a new job or change employers, you can explore several options such as transferring the pension to your new employer or leaving your funds with CSSB until you’re ready to retire.
Membership – who can join
Joining the plan depends on your employment status.
Automatic enrollment
Permanent full-time and part-time employees (working 50% or more)
Once you complete your registration form, your employer will take care of the details. You are a member starting from your first day of permanent employment.
Part-time, casual, departmental, or others who have reached 25% of the CPP maximum in two back-to-back years
Example: In 2023, the maximum was $66,600. In 2024, the maximum was $68,500. A term employee making at least $16,650 in 2023 and at least $17,125 in 2024 would be automatically enrolled. (CRA sets the CPP maximum.)
Term employee
You are enrolled when you have completed one year of service or reached 25% of the CPP maximum in two back-to-back years, whichever happens earlier.
Optional enrollment
Term full-time, term part-time, part-time (working less than 50%), seasonal, and casual employees
Enrollment is not automatic but you can sign a Notice of Desire form to start building your retirement benefits now. Ask your HR or payroll department for help. Don’t miss out.