Planning for Retirement

Let’s assume Luis retires at age 57 with an unreduced OPTrust pension under the OPSEU Pension Plan’s Factor 90 option. Luis knows he is eligible for unreduced CPP benefits at age 65, but he is considering taking CPP early, starting at age 60. In this case, his lifetime CPP pension would be reduced by 30% (6% for each year he is under age 65).

The example on the following pages shows how Luis’s combined monthly pension income and his lifetime pension income are affected by:

the integration of his OPTrust pension with CPP, and
the possibility of taking an early reduced pension from CPP.

In calculating Luis’s lifetime pension, we have assumed he will live to age 75. This example does not show the effect of annual inflation-related increases to Luis’s OPTrust and CPP benefits.

Example 1: Luis’s OPTrust pension + CPP at age 65

Luis’s OPTrust pension: Based on his average salary and years of credit, Luis is eligible for a monthly OPTrust pension of $2,000. When he turns 65, his OPTrust pension will be reduced for CPP integration, to $1,442.

Luis’s CPP pension: If Luis takes CPP at age 65, he will receive a monthly benefit of $700.

Luis’s OPTrust pension + CPP at age 65

From age 57 to 65
OPTrust pension payments of
$2,000 per month x 8 years	$192,000
Total pension income, age 57 to 65 $2,000 per month x 8 years	$192,000
From age 65 to 75
OPTrust pension payments of
$1,442 per month x 10 years (after CPP integration)	$173,040
CPP payments of
$700 per month x 10 years	$84,000
Total pension income, age 65 to 75 $2,142 per month x 10 years	$257,040
LUIS’S TOTAL LIFETIME PENSION, AGE 57 to 75	$449,040

In this example, Luis will start to receive his full CPP benefit at the same time as his OPTrust pension is reduced for CPP integration. As a result, his total pension income will remain relatively stable. In fact, because the OPTrust CPP reduction is less than his total CPP benefit, Luis’s monthly pension income will increase from $2,000 to $2,142.

Example 2: Luis’s OPTrust pension + reduced CPP at age 60

Luis’s OPTrust pension: As in example 1, Luis is eligible for a monthly OPTrust pension of $2,000 until age 65. When he turns 65, his OPTrust pension will be reduced for CPP integration, to $1,442. Luis’s OPTrust pension will still be reduced for CPP integration at age 65, even if he decides to take CPP early.

Luis’s CPP pension: If Luis takes CPP early at age 60, his monthly CPP benefit will be reduced by 30% (6% x 5 years) to $490 for his lifetime.

Luis’s OPTrust pension + reduced CPP at age 60

From age 57 to 60
OPTrust pension payments of
$2,000 per month x 3 years	$72,000
Total pension income, age 57 to 60 $2,000 per month x 3 years	$72,000
From age 60 to 65
OPTrust pension payments of
$2,000 per month x 5 years	$120,000
CPP payments of $490 per month x 5 years	$29,400
Total pension income, age 60 to 65 $2,490 per month x 5 years	$149,400
From age 65 to 75
OPTrust pension payments of
$1,442 per month x 10 years (after CPP integration)	$173,040
CPP payments of $490 per month x 10 years	$58,800
Total pension income, age 65 to 75 $1,932 per month x 10 years	$231,840
LUIS’S TOTAL LIFETIME PENSION, AGE 57 to 75	$453,240

In this example, Luis will start to receive his reduced CPP benefit before his OPTrust pension is reduced for CPP integration. As a result, his total pension income will increase between age 60 and 65. When Luis turns 65, his OPTrust pension will be reduced for CPP integration, while his CPP payments will continue at the reduced level. As a result, his monthly pension income after age 65 will be lower than if he had started CPP at 65.

Figure 1. Luis’s monthly pension: OPTrust + CPP at age 65

Graph of Luis's monthly pension at age 60

Age	OPTrust Pension	CPP pension	Total
57-65	$2,000	--	$2,000
65-75	$1,442	$700	$2,142

Figure 2. Luis’s monthly pension: OPTrust + reduced CPP at age 60