Dear BCGEU Public Sector Pension Plan Member,
We understand that the recently announced changes to the Public Sector Pension Plan (PSPP) design have generated a lot of concerns. Many have indicated to us the communication from the Pension Corporation left them wondering how the plan impacted them, which has created anxiety and confusion. In this environment, serious misinformation has circulated that misrepresents the plan changes, especially on the @work site.
The only way to determine exactly how these changes impact you as an individual will be to wait for the pension plan calculator. Respectfully, please do not try to calculate changes for yourself. We are urging Pension Corp to advance the timeline on the pension calculator, and add a comparator to the old rules, which will show the specific improvement.
Because several of the plan design changes work differently for service after April 1, 2018, there is some confusion about the Bridge, the Rule of 85, and if the changes will impact your ability to retire. We hope to explain broadly how the changes work, why they occurred, and to correct some of the speculation happening amidst the confusion.
The vast majority of plan members will see a great improvement in their pension, but each member's specific situation is unique.
For the average BCGEU member, the value of the pension will increase substantially.
The average age of retirement in the plan is over 60. Approximately 59% of BCGEU plan members earn under the YMPE ($55,900 in 2018). The majority of members retiring both above and below age 60 will still be able to retire with a higher lifetime pension based on the new rules. Further, for an average BCGEU member, even one wanting to retire at 55, if you are able to retire in the next few years, your lifetime pension will be significantly bigger.
Similar rules have already been adopted by the College and Teachers Pensions Plans
Both of these large public sector plans have moved to a flat rate of accrual on future service, and have eliminated the rule of 85 and bridge on future service. This is a trend because moving to a flat rate of accrual modernizes the plan and makes it more equitable. This provides a superior lifetime benefit.
The new rules apply to future service (after April 1, 2018) only.
That means if you have accumulated 20 years of service prior to April 1, 2018, you will get a bridge benefit when you retire, based on those 20 years of service. If you retire before you turn 60, the reduction factor of 3% for each year between 55 and 60 will apply to those 20 years. The old rules apply to old service and the new rules only apply to new service.
On Future Service, your pension's potential value will be much larger.
In practical terms, on service after April 1, 2018, the value of a lifetime pension for someone making $55,900 or less (under the YMPE) will be approximately 37% more. That number slightly reduces the more you make over the YMPE. For example, someone making $84,000 will receive approximately 18%* more on their lifetime pension.
We have guaranteed a retroactive increase to the value of your pension back to 2006.
This increases your accrual below the YMPE from 1.35% to 1.65% retroactively between April 1, 2006 and March 31, 2018. For the average BCGEU member retiring in the next decade, this will represent a greater than 12% increase in the value of their lifetime pension.
The large majority of BCGEU members, including those retiring before the age of 60, will be able to retire at the same age with a higher lifetime pension.
The new rules provide for a larger lifetime pension for members. What this means practically is that, in the majority of cases, members retiring under the age of 60 have a larger lifetime pension than they would have under the old rules.
The new plan design minimizes the subsidy from those who can't afford to retire, and makes the plan more fair.
The new early retirement reduction factor of 6.2% is benefit neutral – which means it is approximately the value of the benefit one gets from early retirement. This change in the new rules makes the plan more equitable. On future service, it means those retiring early will pay their fair share.
Plan changes were requested by the Board on a tight timeline.
Some of you are concerned with the lack of communication prior to implementation of the plan changes. We want to assure everyone this was not by design, and we are committed to identifying gaps in communication from Pension Corporation and working with them, and independently, on a go-forward basis.
We were unable to conduct consultation prior to implementation due to a tight timeline. Faced with the potential of the Board making changes to plan design without input from us or the government, we opted to move quickly. We consulted with senior elected leadership and came to an agreement with government that secured the best outcome possible. The fact we achieved a significant retroactive benefit increase on service back to 2006 – even for members who have already retired – shows a high degree of success in this regard.
For further questions, please contact the BC Pension Corporation.
You can reach them at 1-800-665-3554.
*please note the following correction was made to the original posting, updating the percentage rate to 18% for this example
Do you like this post?