关于政府退休金的疑惑，请教明白人

[mooncake]

I will take LZ's case as example, and put my understanding as following. Please correct if I am wrong......



First, your pension entitlement will only start once you have completed 2 years working for the GoC fulltime. Otherwise the contribution+GoC match portion will be paid out to you upon your departure.



2nd, say you have worked 5 years, you have contributed $100X26x5=13,000 (numbers are just for illustration purposes here.)

And suppose your highest 5 year average salary is 60,000 (this number will be higher the longer you work for the Fed). So your pension formula will be:



60,000x2%x5=$6000



This is the ANNUAL amount you can collect once you reach the age of 65 or have worked for the fed for 35 years. So say you live until 90, and you leave the Fed after 5 years, and keep making your nice dough from private sector. When you retire at 65, in addition to your private sector nestegg, you can also collect $6000 every year for 25 years only because you worked for 5 years for the government. This 6k will also be adjusted by CPI annually. So you would receive:



$6000x25=$150,000



v.s.



your contribution of $13,000



Well, you do the math



Another point, check to see if your previous workplace has Pension Transfer agreement with public Service pension plan, if yes, you are able to transfer over the previous pension and add more years to your service.

Your math is wrong here. Based on earlier post, $100pp contribution indicates an income of 44K, not 60K. So after you pay 13,000, you should get 44000x10% = 4400/year after you are 62 or maybe 67 or even 72 (who knows) when you eventually retire. Say you are 40 this year, that means around 25 years later you will be qualitified to get $4400/year for 25 year = $110,000. But since inflation is around 2.5% per year and for 25 years, everything in average will be 85% more expensive. Plus you don't get 110K up front, but within next 25 years period, you have to compound 2.5%/year annual inflation. So it will be a lot less than you have thought based on buying power.

Typically you make at least 10% more if you work for private company than for public service. If you put your 10% extra earned money into your rrsp account, which will pretty much make up what you get paid for after you retire. And yes, you control when you want to retire.

Gov employee is not a bargain unless you work for low tech job category, in which the pay gap between private company and public service is much smaller, some time is even negative. But at the end of the day you don't get much pay anyway. I doubt a lot of Chinese admire 44K income even with pension.

If you want to work hard and earn hard, forget about public service.

 

[Anakin]

Your math is wrong here. Based on earlier post, $100pp contribution indicates an income of 44K, not 60K. So after you pay 13,000, you should get 44000x10% = 4400/year after you are 62 or maybe 67 or even 72 (who knows) when you eventually retire. Say you are 40 this year, that means around 25 years later you will be qualitified to get $4400/year for 25 year = $110,000. But since inflation is around 2.5% per year and for 25 years, everything in average will be 85% more expensive. Plus you don't get 110K up front, but within next 25 years period, you have to compound 2.5%/year annual inflation. So it will be a lot less than you have thought based on buying power.



Typically you make at least 10% more if you work for private company than for public service. If you put your 10% extra earned money into your rrsp account, which will pretty much make up what you get paid for after you retire. And yes, you control when you want to retire.



Gov employee is not a bargain unless you work for low tech job category, in which the pay gap between private company and public service is much smaller, some time is even negative. But at the end of the day you don't get much pay anyway. I doubt a lot of Chinese admire 44K income even with pension.



If you want to work hard and earn hard, forget about public service.

 

[fido]

O, guuuud! Feeeeeel bettttarr!

Thought Fed pays 100% pension premium for public servants...

 

[挺傻]

1.Typically you make at least 10% more if you work for private company than for public service.
2.If you put your 10% extra earned money into your rrsp account, which will pretty much make up what you get paid for after you retire.
3. I doubt a lot of Chinese admire 44K income even with pension.

1. I doubt this assumption.
2. what the life expectance we were talking about here? And how about the part of survivor pension( spouse, kids younger than 18 or full time students?)
3. I doubt how many chinese still making $44K in G after 5 years. It's not hard to get FI 2 or CS 2 position, which are the two categories lots chinese fill in. The salary in both category tops up around 80K. Not mentioning so many chineses are CS3 or FI 3s (or higher), which makes around 100K and higher.

 

[挺傻]

乐个 P 啊，等到我们退休的那天，pension plan 根本不可能兑现这个 (工作年限 x 2%) 退休金的!

Hard to say, they have to do something about the grandfather plan, may increase contribution percentage. Rigth now, you contribute about 30%, vs government of 70%. They may eventually increase to 50%:50%. As long as it's still a defined benefit plan, I am totally fine with it.

 

[Anakin]

Hard to say, they have to do something about the grandfather plan, may increase contribution percentage. Rigth now, you contribute about 30%, vs government of 70%. They may eventually increase to 50%:50%. As long as it's still a defined benefit plan, I am totally fine with it.

I AM TOTALLY 愤(NOT FINE)。。

 

[简单简单]

as long me not pay for your pension, I am juedui fine with it.

 

[forward]

DB plan could also be changed.

Hard to say, they have to do something about the grandfather plan, may increase contribution percentage. Rigth now, you contribute about 30%, vs government of 70%. They may eventually increase to 50%:50%. As long as it's still a defined benefit plan, I am totally fine with it.

The question is whether government employees believe this system or not. Defined benefit plan could also be changed. We already saw many switch in US and Canada during the past decades. In next 15-20 years, pension withdrawal will be dramatically increased with the expectation of shortfalls. It is not surprised to see government employees took early retirement nowadays as it is widely agreed the future benefit will not be the same as the current.

 

[Martin]

Pension is indexed with CPI. So, inflation has no affect on value of your pension.



Your basic pension benefits increase each January after you retire to take into account increases in the Consumer Price Index (CPI). The first increase payable the year after you retire will be prorated to reflect the number of full months since your retirement date. If there is no change in the CPI, or if it drops, your pension will not be adjusted that year.



If you retire with entitlement to a deferred annuity, your basic pension, when it is payable, will be increased by the total accumulated percentage increases from your date of retirement.

 

[URL]

Your math is wrong here. Based on earlier post, $100pp contribution indicates an income of 44K, not 60K. So after you pay 13,000, you should get 44000x10% = 4400/year after you are 62 or maybe 67 or even 72 (who knows) when you eventually retire. Say you are 40 this year, that means around 25 years later you will be qualitified to get $4400/year for 25 year = $110,000. But since inflation is around 2.5% per year and for 25 years, everything in average will be 85% more expensive. Plus you don't get 110K up front, but within next 25 years period, you have to compound 2.5%/year annual inflation. So it will be a lot less than you have thought based on buying power.

A key factor to keep in mind is that the public service pension plan is fully indexed, thus protected from inflation. Indexing is an adjustment of the pension benefit based on CPI increase, which essentially preserve your buying power. Without indexing, a defined benefit pension plan (DBPP) would not mean much for the reason you argued above, but with indexing, it is a different story.

What is important is that money has time value. A dollar you save/contribute today naturally worths more than a dollar you get in the future. For people who don't have a DBPP, managing their DCPP or RRSP well and striving to get a return higher than CPI over a long period is critical; if they can do that, their retirement life will be just fine. However, it has been proved to be very challenging in the past decade and in the years to come.

For the exact reason, DBPP is enviable and very expensive to keep, that's why it is under scrutiny by the public, and people should not be suprised to see some erosion to happen eventually.

 

[mooncake]

1. I doubt this assumption.

2. what the life expectance we were talking about here? And how about the part of survivor pension( spouse, kids younger than 18 or full time students?)

3. I doubt how many chinese still making $44K in G after 5 years. It's not hard to get FI 2 or CS 2 position, which are the two categories lots chinese fill in. The salary in both category tops up around 80K. Not mentioning so many chineses are CS3 or FI 3s (or higher), which makes around 100K and higher.

1. If it is comparable job/title. for example, lowest cs1 (new grads) is 50k, it is hard for any cs new grads to take an offer lower than 55K for a private sector. CS2 start from 65K, but one can get close to 80K after 8 years being CS2, in private sector, one can get around 75K~90K being an intermediate sw developer. A senior software developer easily makes 90K+, while a CS3 at its top most level8 will make similar amount. If one made it to CS4, congratulations!

2. Yes, it is a very case by case finance decision, but since there is TSFA vehicle, one can absulately take advantage.

3. I agree. But you will be suprised how many CS or EE Chinese in ottawa making 6 figure income in private sector as well.

 

[xiange]

楼主的算法十分有趣, 明白人都给绕迷惑了.

 

[挺傻]

The question is whether government employees believe this system or not. Defined benefit plan could also be changed. We already saw many switch in US and Canada during the past decades. In next 15-20 years, pension withdrawal will be dramatically increased with the expectation of shortfalls. It is not surprised to see government employees took early retirement nowadays as it is widely agreed the future benefit will not be the same as the current.

It may change eventually from defined benefit plan to defined contribution plan or whatever it proposed, but I am still thinking there will be a grandfather rule for those who have already joined G more than 2 years and contributed to the plan. As far as I know, some crown corp in Ottawa changed their pension plan to defined contribution, but kept grandfather plan as defined benefit. ( may increase the contribution percentage though)

 

[赵钱孙李]

搬个板凳

 

[URL]

It may change eventually from defined benefit plan to defined contribution plan or whatever it proposed, but I am still thinking there will be a grandfather rule for those who have already joined G more than 2 years and contributed to the plan. As far as I know, some crown corp in Ottawa changed their pension plan to defined contribution, but kept grandfather plan as defined benefit. ( may increase the contribution percentage though)

Agreed. I am not sure if any crown corp has actually transformed their DBPP to DCPP, but that is certainly a trend, and such motion by the management was a key issue that led to the Air Canada and Canada Post strike last year.

Even this is likely to happen, I believe members of the existing DBPP will be grandfathered, although the rules may be tightened up in terms of early retirement, contribution ratio, etc. When the entire society suffers through financial crunch, it is not justifiable for the public servants to hold on to their lucrative benefits without a dent.

In a strong sense, I wish Mooncake's arguments about the advantages of working in the private sector would all stand. It is unfortunate for the nation if many of its talents become bureaucrats largely because of its total compensation and retirement benefits.