What’s meant by “forms” of pension payment? Just that. Pensions come in different forms or types. This means you can choose the one that best fits your specific needs. You may wish to speak to a financial advisor, or a person familiar with financial matters, who can help you determine which form of pension is best for you.
Which form you choose, is an important decision. Once you’ve chosen a form and your payments have started, your decision is irreversible. The MSPP doesn’t allow you to change forms once the pension starts to be paid.
According to pension law, if you have an eligible spouse on the date your pension begins, your form of pension must provide at least a 60% Joint and Survivor Benefit for your spouse should you die first. This form provides a monthly pension for your lifetime and, after your death, 60% of your pension amount will continue to your spouse for the rest of his or her lifetime. In this case, the amount of your monthly target pension will be reduced to reflect the expected longer period of time over which your pension may be paid. If your spouse does not want a survivor pension, he or she may waive this benefit.
If the 60% Joint and Survivor Benefit has been waived, you can choose one of the Optional Forms of Pension.
If you do not have an eligible spouse at the time of your retirement your form of pension will be a lifetime pension with a 5-year minimum payment term. This means that if you die before receiving 60 monthly payments, your beneficiary or estate will receive the lump sum value of the remaining monthly payments discounted for interest. If this form of pension does not meet your needs, you may also choose any of the Optional Forms of Pension.
Small Pension: If your pension is less than $80 per month at age 65, you will receive the value of your pension as a lump sum payment or as a monthly pension starting at age 65. A lump sum payment can be received as a taxable cash payment, or it can be transferred tax-free to a non-locked-in RRSP. Note: If you work in a province other than Ontario, different rules may apply. Please contact InBenefits for more information.
Shortened Life Expectancy: Where a person entitled to payment of a Normal, Early or Delayed pension has a mental or physical disability that, according to medical evidence satisfactory to the Trustees, is likely to substantially shorten the life expectancy of that person, the Trustees shall, at the written request of such person, pay out the Commuted Value of the pension in a lump sum. The eligibility criteria and the procedure for making application for such payment shall be in accordance with the Regulations under the Act. Note: If you work in a province other than Ontario, different rules may apply. Please contact InBenefits for more information.
Life Pension with 10 or 15 Year Minimum Payment Term: This option pays you a monthly pension for your lifetime with a minimum payment term. If you die before receiving 120 or 180 monthly payments, your beneficiary or estate will receive the lump sum value of the remaining monthly payments discounted for interest. The amount of your monthly target pension will be adjusted down to pay for the 120 or 180 minimum term.
Life Only Pension: This option provides a pension for your lifetime and, upon your death, all payments from the Plan stop. If you choose this option, the amount of your monthly target pension will be increased since there is no minimum term.
Joint and Survivor Benefit (50%, 75% or 100%): This option provides a monthly pension for your lifetime and, after your death, a percentage of that pension will continue to your spouse for the rest of his or her lifetime. You may choose to continue 50%, 75% or 100% of your pension to your surviving spouse. The amount of your monthly target pension will be adjusted based on the percentage you choose to continue to your spouse and on your age and your spouse’s age at the time of your retirement.
