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 Summer 2000

Sample Pension Statement

AS A WAY OF SUMMARLZTNG OUR LOOK AT pension plans in Canada today, let us look at a pension plan statement issued by one of the largest pension plans in the country to one of its members.

The statement is divided into six sections plus notes, as follows:

Section One entitled "Personal Information" contains basic personal information about the contributor as well as such important information as: (a) the date the contributor joined the plan; (b) the date that her contributions became vested within the plan and consequently the period of time over which employer contributed benefits (if any) have been accumulating; (c) the normal retirement date which under this plan is the last day of the month in which the contributor turns 65 years of age; (d) the earliest date of retirement at which time she will be able to collect an "unreduced pension". To qualify for this provision, if the contributor has been with the plan for thirty years she can begin to collect benefits in the month after she attains her 55th birthday, or if she has been a plan member for a minimum of only two years this benefit becomes available in the month after she reaches her 60th birthday; and (e) information as to whom benefits will be payable should the contributor die prior to reaching retirement.

Section Two describes "Contributions, Earnings and Service". This is a "defined contribution" pension plan and all contributions to the plan are maintained in a separate account on the contributor’s behalf. This section summarizes the status of her account as at the statement date. It commences with the account balance at the beginning of the year and describes her contributions during the year as well as the interest that has accrued to her account over the preceding twelve months.

Since benefits can be accessed partly through years of service, this section also outlines her years of service, on an annual basis, since joining the plan.

Section Three describes "Benefits on Retirement". This section explains the dates at which the contributor will be entitled to receive her full pension (at ages 55, 60, and 65) and the estimated monthly benefit that she is likely to enjoy when she comes to collect.

The statement indicates that contributors will receive pension benefits, when they retire, based upon "the highest average of their annualized earnings during any five consecutive years of plan membership". Annualized earnings are defined as the contributor’s salary during the year, excluding certain bonuses and overtime pay that she may have earned. Since benefits are ultimately to be paid out based upon the contributor’s "average annualized earnings", this section indicates the current calculation of this amount as at the statement date.

The plan recognizes that many within its membership work only part-time during the year and requires a contributor to work a minimum of only seven weeks before contributions can be made.

Sections Four to Six describe how the plan treats the contributions of members under certain conditions. These include voluntary termination, death and disability.

Finally, the notes to the statement indicate that the projections outlined throughout the statement are pretax estimates only, based upon information supplied by the employer(s) and the actual terms of the Pension Plan as outlined in the official by-laws. It is only in this volume that the member will be able to get information as to plan’s funding target and the actuary’s assumptions about how much money will be needed to meet the promised payouts to the membership.

SUMMER 2000: Introduction to Retirement Income | Pension Plans: The Nuts and Bolts | Show Me the Money | The Effects of Inflation on Pension Benefits |Sample Pension Statement

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