# more on pension buybacks



## the-royal-mail (Dec 11, 2009)

I've been doing some reading on DB buyback schemes here in CMF as well as via google. I see there have been a couple threads in the past in CMF and I have read those threads. 

I guess what I am trying to understand better is the goal of the buyback schemes for members in DB plans. From what I've read, the "target market" for these schemes is for people who may have missed out on some years of service for things like unpaid leave of absense (LOA), sabbaticals and the like.

Are these the only situations where a buyback can be used? Can they be used at any time?

Can members of a DB pension plan use buybacks as a way of retiring earlier (by investing the cash in the DB plan instead of say, an RRSP)? Top up your DB plan and allow for earlier retirement?

And theoretically, if a member of a DB plan should leave his employer much earlier than anticipated, the cash would still be there in any case, ie. it's not like you lose the money when you leave for another employer.


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## sags (May 15, 2010)

The "buybacks" that have been discussed involve DB pension plans that allow them, and not all do.

The cost of buying back pension time can be very expensive, if there is considerable time delay between the time worked and the buyback, because both the employer and employee portions......plus investment income........must be paid back.

In my wife's scenario buying back 1 year of seniority, 20 years later, was going to cost her $12,000 per year and would benefit her pension by $35 per month.

We concluded it was too expensive.


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## OhGreatGuru (May 24, 2009)

As to what kind of service time can be bought back, it depends on the pension plan.

Another kind that some plans offer is buying back prior service such as:
- short-term employment periods when you were not enroled in the pension plan at all (typical for summer students)
- short-term employment periods when you did contribute to the plan, but left before it was vested, and your contributions were paid out to you on departure.


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## the-royal-mail (Dec 11, 2009)

I see. So buybacks can't be used by someone with extra cash (who hasn't met the conditions mentioned in the responses above) to hasten the process and "top up" the pension?


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## MoneyGal (Apr 24, 2009)

sags said:


> In my wife's scenario buying back 1 year of seniority, 20 years later, was going to cost her $12,000 per year and would benefit her pension by $35 per month.


A powerful signal about the true cost of longevity-protected, inflation-protected income in retirement.


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## sags (May 15, 2010)

Buybacks are to purchase previously earned pension years. 

They could be available if a person quits a job, goes to another employer, and at some time in the future finds themselves back in the same employer or an employer with the same pension plan.

This happens mostly with the broad based pensions that cover an industry, like the HOOPP that covers hospital workers. Teachers are probably another example.

As far as I know, you can't purchase time that you haven't worked, to "top up" the pension plans.


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## martinv (Apr 30, 2009)

I know it can't be done but I would love it if I could buy some more CPP years.

This $98 doesn't even keep me in coffee......well, yes I guess it does since I don't buy lattes. Actually, it is keeping me in fish tacos. It is Baja time again.
Edelita's is open and the fish is terrific.

Not complaining though as it was my choice to enjoy sailing and working in the tropics for 20 years.


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## Eclectic12 (Oct 20, 2010)

OhGreatGuru said:


> As to what kind of service time can be bought back, it depends on the pension plan.
> 
> Another kind that some plans offer is buying back prior service such as:
> - short-term employment periods when you were not enroled in the pension plan at all (typical for summer students)
> - short-term employment periods when you did contribute to the plan, but left before it was vested, and your contributions were paid out to you on departure.


For one db plan I was in, when I was eligible to join the DB plan, I could "buy-back" time with the money from the DB plan I'd left. It seemed to be a loophole to get around that the new DB plan didn't allow transfers from other plans.

It didn't help as what I recall is that the commuted value of eight years in the old plan was going to buy me about five months service in the new plan. The "increase" in benefits was not worth it, in my case.


Cheers


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## Financial Cents (Jul 22, 2010)

MoneyGal said:


> A powerful signal about the true cost of longevity-protected, inflation-protected income in retirement.


Absolutely, crazy isn't it???


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## Sophie (Oct 20, 2011)

*Buy back worth it?*

Say if you're in your 50's and have the opportunity to buy back 3 years for 15K and you're really only going to get 10 years total at most - is it still worth it?


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