Additional information about your Pension Options Form
Your CV will not be recalculated once the CV option is no longer available to you. Due to the Plan change, you may become ineligible for the CV option before your early retirement birthday.
A CV is calculated using standards, as required under the Ontario Pension Benefits Act. These standards, which are set by the Canadian Institute of Actuaries, take into consideration factors including future interest and mortality rates, and inflation. These factors change over time, which is why the Actuarial Standards Board periodically makes changes to the standards to better reflect the current economic value of these benefits. A CV is not determined by investment returns on the pension plan’s assets.
CV option and amount guarantee
If you are entitled to a CV, this option will appear in your Pension Options Form when your employment ends. Your CV transfer option and amount is guaranteed up to the expiry date indicated in your Pension Options Form.
After the expiry date, the CV option may no longer be available, but you may be eligible for other pension options. It is important that you make an informed decision when considering your pension options.
Your CV, taxes and income options
The Income Tax Act (ITA) sets a maximum amount of CV you can transfer, tax-sheltered, to a LIRA. The maximum transfer value is specific to each person, and is based on age and the pension amount. If the CV of your pension exceeds the ITA maximum transfer value, we will refund the excess to you in cash (and withhold income tax).
Once you reach the minimum OMERS retirement age, you can use your LIRA funds to purchase a life annuity or a LIF from an insurance company, bank, or other financial institution.
Your CV amount may be large, but so is the cost of generating future monthly retirement income for your lifetime and, potentially, for your surviving spouse. You will be responsible for the investment of your CV. Keep in mind that investment earnings can fluctuate, and you will likely be paying transaction fees and expenses for your investments.
Life income funds and annuities are sold by a variety of financial institutions and may have many different features. Shop around and carefully check out what you are buying. When you ask for an annuity quote, list the features you have in the OMERS Plan, and the features you want, and compare the annuity quote with the amount of your CV. You may find that features that come standard with your OMERS pension cost extra through an annuity. Since you have a limited window to elect the CV option, it is important to start the process as soon as possible.
Consider enlisting the services of an independent financial adviser – one who will work for you and who will not benefit from your commuted value transfer.
With their help:
- Look at your options – leaving your pension in OMERS or transferring your CV out of the Plan (to invest and then perhaps buy an annuity when you retire).
- Consider the regular, future retirement income you will receive from OMERS when you retire – that it is payable for your lifetime, that it is fully protected against inflation, and that it includes a 66 2/3% pension for your surviving spouse. What would an annuity provide?
- Consider also that if your CV exceeds the ITA maximum transfer value you are taxed on the excess amount, which you must take in cash. The tax amount can be high, and this could make it less likely that your CV will produce a pension equivalent to what you would have earned in OMERS.