Part Three: Choosing the right survivor benefit options
May 29, 2014
This is the third installment of a three-part retirement series to help you navigate through retirement planning. In this final article, we highlight some of the important decisions you need to make when it comes to choosing your survivor benefit options. Be sure to check out part one, which answered your most common retirement questions and part two, which broke down key retirement steps with a timeline.
Learn more about survivor benefits in our resource section as well as through our Survivor Benefits Guide.
Survivor benefits have a significant value and should be an important consideration when thinking about your future finances.
What do you need to do to ensure financial security for your loved ones when you die? In the case of your pension plan, your eligible spouse or dependent children may be entitled to survivor benefits after your death. The type and amount of benefits depend on how long you've been teaching, who is eligible for benefits, and whether you die before or after your receive your first pension payment. Here are a few things you need to consider leading up to retirement:
Review marital and beneficiary information
Ensure your marital information and beneficiaries are complete and up to date. To do this, log into iAccess Web, our secure member website, and select "My Profile" from the "My Home" tab. Expand the "Marital Information" section to view and ensure the information is up to date. After reviewing your marital information, expand the "Beneficiaries" section and follow the instructions to make any necessary changes.
Confirm survivor pension percentage
At least two years before you retire, adjust your survivor pension percentage to 75%. Doing this will ensure you have all options available regardless of your health at retirement. Log into iAccess Web and select "My Profile" from the "My Home" tab, and expand the "Marital Information" section.
When you are completing your pension application, take the time to adjust and finalize the survivor pension percentage that will best meet your needs. We added a few questions within the survivor pension section of the pension application to help you decide how much of your pension should be designated to your loved one. For example: is your loved one financially dependent on you? If your answer is yes, you may wish to give them a higher percentage of your pension. If your answer is no, you may wish to give them a smaller percentage of your pension.
Note, there is a cost to providing a higher survivor benefit (55% and up). The cost is taken from your pension once you retire. To see the estimated reduction to your projected annual pension and the corresponding survivor pension for the various options, log into iAccess Web and click on "Survivor Benefits" under the "My Retirement" tab.
Consider the 10-year pension guarantee
If you have a spouse, we encourage you to consider the 10-year pension guarantee when you are applying for your pension. Why? If you die before you've been on pension for 10 years, this guarantee provides your CPP-reduced pension to your spouse for the balance of 10 years. If you do not have a spouse at the time of your retirement, the 10-year pension guarantee is automatically provided at no cost. Here's how it works:
- Your eligible spouse will receive 100% of your CPP-reduced pension for the balance of 10 years (from your pension start date) or to your eligible spouse's date of death, if earlier. Following the 10-year period, your eligible spouse will receive your lifetime survivor pension at 50-75% of your CPP-reduced pension (based on the option you selected prior to starting your pension)
- Your dependent children (if there was no eligible spouse or after eligible spouse's death) will receive 100% of your CPP-reduced pension for the balance of 10 years (from your pension start date) or to the date the last child is no longer dependent, if earlier. Following the 10-year period, your dependent children will receive 50-75% of your CPP-reduced pension until the last child is no longer dependent.
- Your estate (if there was no eligible spouse or dependent children) will receive the present value of your remaining CPP-reduced pension payments, within the 10 year guarantee period paid as one lump sum. In this case, no amount remains for your estate if you die after the 10-year period.
Tip: If you do not have a spouse at the time of retirement, the 10-year pension guarantee is automatically provided to you at no cost. If you do have a spouse, you must opt into the 10-year pension guarantee to receive it, however there is a small cost involved. That said, we recommend you opt for the 10-year guarantee because it is considered to be a very affordable form of insurance. The lifetime reduction for this option is 0.1% of your CPP-reduced annual pension (or $44 per year on average).