Member Newsletter

Leaving your OMERS employer?

Your future is our focus, even if you leave your OMERS employer before you can start your pension. You can keep your pension with OMERS and get a future stream of retirement income for life.

If you ever have to face the decision of what to do with your pension, one important factor is your comfort level regarding investment risk. If you keep your pension with OMERS, you are guaranteed future monthly pension income for life. If you choose to take a commuted value transfer of your OMERS entitlement out of the Plan into a retirement savings vehicle, you take on the responsibility for managing your investments and the risk that you may outlive your savings. Keep in mind that, while a lump-sum payout of your pension may seem like a lot of money, it has to last you for life and, in many cases, only a portion of it can go directly into a locked-in tax-sheltered account, and the rest is fully taxable. 
 

    Mona
    Mona age 54
    Mona is leaving her OMERS employer to spend more time with her recently retired husband. She can begin an OMERS pension as soon as she turns 55 or immediately transfer her benefit out of the OMERS Plan and assume all investment risk.
    Normal retirement age 65
    Years of service 30
    Pensionable earnings $62,000
    OMERS Pension at 55
    (inflation protected)
    Annual lifetime pension $26,700
    Plus bridge benefit (from 55-65) $9,500
    followed by
    Surviving spouse
    (2/3 lifetime)
    $17,800
    Paid for life
    John
    John age 49
    John is moving to British Columbia and will be leaving his OMERS employer. He can begin an OMERS pension as soon as he turns 50 or immediately transfer his benefit out of the OMERS plan and assume all investment risk.
    Normal retirement age 60
    Years of service 26
    Pensionable earnings $90,000
    OMERS Pension at 50
    (inflation protected)
    Annual lifetime pension $27,800
    Plus bridge benefit (from 55-65) $8,300
    followed by
    Surviving spouse
    (2/3 lifetime)
    $18,000
    Paid for life

    Mona and John will both receive an OMERS pension paid for life. If instead they elected a commuted value transfer out of the Plan (prior to their early retirement age), and assuming the invested transfer amount earns a rate of return of 4% every year (net of investment expenses) and they only make annual withdrawals equal to the indexed OMERS pension income:

    • Mona's money would likely last until 80 versus a lifetime pension with OMERS. Her average life expectancy is 90.*
    • John's money would likely last until 78 versus a lifetime pension with OMERS. His average life expectancy is 85.*

    In addition:

    • they would be required to transfer their commuted value to a registered locked-in vehicle, up to the Income Tax Act allowable limits; and
    • any money above the Income Tax Act limits would be fully taxable.

    *45% income tax on the taxable portion of the lump-sum transfer amount; 20% income tax on the annual pension income. Tax-adjusted annual amounts are withdrawn from the fully taxable portion first. Annual pension income is assumed indexed at the rate of 2% per annum.

    This case study is for illustrative and general information purposes only. It is not intended to provide specific financial or other advice and should not be relied upon in that regard. You should consider seeking the counsel of a qualified financial advisor you trust. Your actual OMERS defined benefit pension and the return from any mutual funds (LIRA or RRSP) or other investments will vary from the amounts in the case study.