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What's the scoop on your leave?

When you take a leave from work, you don't contribute to your pension.

Think of your pension like a sundae.

That break from contributing might mean you have to work longer or maybe you'll retire with a smaller sundae. Paying for your leave makes up for those scoops you missed and could let you retire sooner, with a bigger sundae.

We call paying for a leave a buyback.

Explore how paying for a leave will affect your:

Your wallet

For a typical full-time teacher, making up for a year's gap in your pension typically costs between $6,000–$12,000.

Here are three things to keep in mind:

  1. The Ontario government or your employer match contributions to your pension.
  2. Your pension is about as close to a guaranteed investment as you can get. When you retire, your monthly payment will be determined by a formula, not the ups and downs of the market.
  3. It's not all or nothing. You can pay for as little or as much of your leave as you want. Every little bit counts. Check out how this affects your RRSP contribution room.

Once you tell us you plan to pay for your leave, your RRSP contribution room will be reduced. This reduction to your contribution room will happen whether you pay for some, all, or none of your leave.

*Our lawyers really want you to know this.

Your wallet

Once your leave ends, you have five years to pay.

You can pay for your leave in one big scoop, or break it up into bite-size spoonfuls to spread the payments out over those five years.

So if you pay for a $10,000 leave over five years, your monthly cost would be about $180 a month (including interest).

Interest starts once your leave ends, but our annual rates have recently tended to hover below 2%. While rates can go up or down, don’t worry about paying right away.

Your wallet

Like vanilla, chocolate or a swirl of both, you have choices in how to pay for your leave. Use cash (electronic fund transfer or cheque), RRSPs, or a scoop of each to create a combo that works for you.

CASH

• You may get a tax deduction
• Small or no administration fees from your financial institution
• DIY through online banking or post-dated cheques

RRSP

• No tax break – you’re moving money from one type of tax-sheltered retirement plan to another
• You won’t regain RRSP contribution room for the amount you’re putting towards your leave
• Potentially higher administration fees from your financial institution
Take this form to your financial institution to set-up the transfer
• Plan ahead! A transfer can take up to six weeks

Ready to pay for your leave? Here's how to get started.

Taxes Pension

Here's how to make payments:

  • Electronic Funds Transfer:   Set Ontario Teachers’ Pension Plan as a payee in your online bank account. Use your Ontario Teachers’ account number (tip: you can find this in the top right-hand corner of the emails we send you).
  • Cheque:   Make post-dated cheques out to Ontario Teachers’ Pension Plan. Put the date of your leave and your Ontario Teachers’ account number in the memo; or
  • RRSP:   Take this form to your financial institution to set-up the transfer.

Your taxes

Just like ice cream, taxes can be sticky.

What’s the connection between taxes and your leave?

When you choose to pay for your leave you reduce your RRSP room, whether or not you actually pay for it.

Your leave and your taxes also share an important date, April 30.

Did you know that participating in another pension plan during a leave could affect your taxes? Call us (1-800-668-0105).

Don’t worry, contributing to the Canada Pension Plan or an RRSP doesn’t count.

Once you tell us you plan to pay for your leave, your RRSP contribution room will be reduced. This reduction to your contribution room will happen whether you pay for some, all, or none of your leave.

*Our lawyers really want you to know this.

Your taxes

You have until April 30 of the year following the end of your leave to let us know if you have an appetite to pay for your leave. Think of April 30 like a best before date.

So, if your leave ended in 2018, its best before date is April 30, 2019.

After April 30, things get a bit more complicated.

Your taxes

Reducing your RRSP room: The Canada Revenue Agency (CRA) looks at how much you contribute to your pension in a calendar year. They calculate how much those contributions will be worth as a pension benefit. They reduce your RRSP room by that amount. This reduction is called a pension adjustment.

If you're a full-time teacher with a salary around $78,000 and you pay about $10,000 for your leave, your pension adjustment will be around $14,000. Your RRSP contribution room will be reduced by about $14,000.

The reduction to your contribution room will be larger than the cost of your leave. This is because the Canada Revenue Agency (CRA) calculates the value that paying for your leave will add to your pension.

Pension Adjustment

Your future pension is about as close to a guaranteed investment as you can get.

The reduction to your contribution room will be larger than the cost of your leave. This is because the Canada Revenue Agency (CRA) calculates the value that paying for your leave will add to your pension.

Your taxes

If you tell us you intend to pay for your leave before April 30, we’ll issue a pension adjustment for the full amount of your leave.

You’ll file the pension adjustment with the CRA (and we’ll report it to them too). The CRA will reduce your RRSP contribution room.

Once you tell us you plan to pay for your leave, this reduction will happen whether you pay for some, all, or none of your leave.

Pension Wallet

Your pension

The size of your sundae and when you can dig in depends on:

  • How long you work
  • Your salary

Check out the formula we use to calculate your pension.

2%
x Credit
x "Best-five" average salary
= Annual Pension

  • Credit is your actual teaching time, right down to the day
  • "Best-five" is the average of your best-five years’ salaries

Your pension

By paying for your entire leave and filling that gap in your credit, it will be like you never took time off.

Why not just work an extra year to make up for your leave? Let’s face it, the closer you get to retirement, the more appetizing that sundae will be.

And hey, if you choose to work that year even after you pay for your leave, then it will be like having an extra scoop.

Your pension

How much bigger will your sundae be?

If you’re like a typical teacher, paying for a $10,000 leave could increase your pension by about $1,880 each year.

Most of our retired members collect a pension for around 30 years, so paying for that leave today could mean you’ll get as much as $56,000 more throughout your retirement.

Wallet Taxes

If you tell us you intend to pay for your leave before April 30, we’ll issue a pension adjustment for the full amount of your leave.

You’ll file the pension adjustment with the CRA (and we’ll report it to them too). The CRA will reduce your RRSP contribution room.

Once you tell us you plan to pay for your leave, this reduction will happen whether you pay for some, all, or none of your leave.