# Effect of reduction on DB plan when CPP kicks in



## Northof60 (Nov 22, 2010)

Hi folks

Sorry if the answer is elsewhere.

I am in Defined Benefit pension plan (PSSP). I have prepared several retirment scenerios that involve supplementaing my pension with RRSP with drawals, savings (already taxed), and TFSA withdrawals. I have also factored in OAS at 65 and income splitting.

I have basically ignored CPP. The premise I am going with is this. If I wait until 65 (and I can hold off) then the reduction in my DB pension will be pretty much the same as what I get in CPP, so I am considering this a wash. As far as I am concerned, if the difference (if any) is not more than $50 to $100 a month in my favour or not, I am not going to bother factoring this in to my excel calculations.

I am just going to use the figures from my DB plan and proceed as if the only thing that changes at 65 is that I get OAS (and age credit). After all, my DB and the CPP will both be indexed.

Am I safe to make this assumption, or is there some horid set of curcumstances that might cause my pension reduction to be way more at 65 then the amount of CPP that will replace it?

I have been able to obtain estimates of the reduction at 65 and what my CPP will be at 65, and they are pretty close. 

But, I trust these estimates about as much as It trust the tax calculator on the fed's PSSP site...lol. 

Thanks in advance for any replies.


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## OhGreatGuru (May 24, 2009)

It's a fairly safe assumption for planning purposes, if most of your working career has been with PSSP. If you have earned CPP benefits from other employment they would not be reduced, as the reduction in your DB pension at 65 should be based only on your years of pensionable service. But in that case ignoring the reduction would be erring on the safe side anyway. Also if you plan to take your CPP early (or late) you need to do separate calculations, but otherwise no.

If CPP levels change (and there seems no appetite amongst some of our more parochial premiers to do so) it will take a number of years for the effects to phase in, and the formula for integration of benefits between PSSP and CPP would be adjusted to reflect the phasing of such changes. (This would actually be one of the more complicated consequences of increasing CPP benefits.)


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## kcowan (Jul 1, 2010)

Most DB pensions will offer a bridge to retirement that is the amount of CPP you will get at 65. But if you retire early that bridge will be paid whether you take CPP early or not. IOW it is an actuarial calculation, not a commitment.


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## Northof60 (Nov 22, 2010)

Thx OhGreatGuru and kcowan


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