Below are numerous terms you'll come across while learning about the Canadian pension industry.


An actuary is responsible for ensuring that every defined benefit pension plan in Canada is financed in accordance with legislative requirements and that plan members' pension benefits are safeguarded. Actuaries also work for insurance companies.

Annual Inflation Rate

Most products you purchase increase with inflation over time. The rate of increase depends on market conditions and the economy. The Canadian Government is committed to keeping the rate of inflation to less than 3%. We use the rate of inflation to determine how much your pension may be indexed before and after retirement. (Michael: What does it mean "Pension may be indexed?)


An annuity is a contractual financial product sold by insurance companies to pay you a monthly income for the rest of your life. During the accumulation phase, you invest money into the annuity, and then, upon annuitization, the annuity will pay out your monthly income.

Base Salary

Base salary is used to determine how much pension you will receive at retirement. Another way to describe base salary is your pensionable earnings.

BC Public Sector Pension Plans

There are five main BC Public Sector pension plans covering thousands of BC workers and former workers. They cover teachers and school workers, municipal and health care workers, individuals working in public safety occupations, college employees and employees of WorkSafeBC.

Buy-back Service

Buy-back service refers to the ability to purchase pensionable service for past years of employment in order to increase your total pensionable service. Pension buy back really applies to those individuals who are part of a defined benefit pension plan and who may have missed out on some years of contribution service. Some examples might include a maternity leave, sabbatical, leave of absence or war service.

Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a government-sponsored investment fund that invests employee and employer contributions and pays out benefits to retirees, survivors, and disabled workers in accordance with rules administered by Service Canada. Every worker in Canada has to contribute to CPP and will receive a pension on their retirement when eligible.

Commuted Value

The commuted value is the lump sum value of your pension based on prescribed interest rates and mortality rates.


You contribute to your pension plan and the amount of your contributions is specified by your collective agreement or your employment agreement. Your employer also contributes to your pension. In most cases, your employer contributes much more than you do.

Contributory Service

Contributory service is used to determine when you are eligible for a pension. It is measured in years and months. You earn one month of contributory service when you earn any pay for that month and you and/or your employer make the required contribution for that time.

Current Salary

Your current salary is used to estimate how much pension you will be entitled to when you leave or retire. In most cases, for our reports we ask for your annual rate of salary, sometimes called base salary, even if you work part-time. (Michael, is the current salary different from base salary?)

Death Benefit

Your pension plan will pay a death benefit to your beneficiary if you die while a member of the plan. This holds true if you are an active member or a former member who is still entitled to a pension.

Deferred Pension

You may be entitled to a deferred pension if you terminate employment before being eligible for retirement. This pension would be payable starting at some future date - hence the term deferred.

Defined Benefit Plan

This type of pension plan provides you with a fixed pension at retirement based on your service and salary, calculated in accordance with the plan rules.

Defined Contribution Plan

Your pension plan is defined contribution if the contributions are fixed. However, the benefit, or retirement income, is not fixed, rather it's based on the investment performance of your pension assets.

Gross Investment Return

The Gross Investment Return is the annual rate of return you can earn on all your investments. Typically, these rates range from 1% for risk-free investments to 5% or more for high-risk investments. We believe that a long-term rate of 4% is achievable if you can accept moderate risk such as dividend equities, corporate bonds, real estate.

Guaranteed Income Supplement

The Guaranteed Income Supplement (GIS) is available to low income seniors who do not qualify for the Canadian Pension Plan (CPP) or Old Age Security (OAS).

Index Rate

Your pensions are indexed to inflation, which means that each year the pension plan may index, or increase, on par with the performance of the Consumer Price Index. Indexing is not guaranteed and some pension plans modify the index rate so it rises less than the rate of inflation.

Indexed To Inflation

Your pension is indexed to inflation, which means that each year, your pension may be increased dependent upon the rate of increase in the Consumer Price Index (CPI) and according to the rules established by your pension plan. There is no guarantee that your pension will be indexed every year.


Inflation is defined as a sustained increase in the general level of prices for goods and services.The most common measure of inflation is the Consumer Price Index (CPI), which is measured monthly. As inflation rises, every dollar you own buys a smaller percentage of a good or service. Your retirement pension is increased in line with changes to the CPI.

Interest Rate

Interest rate and investment return are synonymous. Interest is typically paid on bonds, bank accounts, and Guaranteed Income Supplements. In today's market, typical rates vary from 1% (or less if a bank account) to 4%.


Life Income Fund. You have to convert your Locked-in Retirement Account (LIRA) to a LIF when you want to start receiving income from your LIRA/LIF. There are rules about how much you can withdraw from your LIF and when you can set one up.


LIRA stands for Locked-in Retirement Account. Similar to an RRSP but you cannot take the full amount out in cash and have to pay yourself a monthly income for your lifetime.


Locked-in means that your pension funds cannot be taken in a cash lump sum but must be paid to you over your lifetime in accordance with rules established by the B.C. Pension authorities.

Long-term Disability

Your employer may sponsor a long-term disability (LTD) plan that pays you a monthly income if you become permanently disabled. You can receive these pensionable service payments if the LTD plan is approved by the Pension Corporation.

Mortgage Rate

If you have a mortgage on your home, your mortgage payments are based on the mortgage rate, or interest rate that applies. Today, these rates are typically between 2% and 5%, but they have been much higher in the past. The higher this rate is, the more you pay.

Mutual Fund

Mutual funds are professionally-managed investment funds that pool money from many investors to purchase securities. Your investments are made up of units held in these funds. If the mutual fund manager invests your money wisely, then your investments will increase, but they can go down as well.

Non-contributory Period

Any time that you do not contribute to your pension plan, such as during maternity leave, is defined as a non-contributory period. You may be able to covert this period to contributory service and earn a pension. (Michael: Under what circumstances would you be able to convert this period to contributory service?)

Old Age Security

Old Age Security (OAS) benefits are paid out of Federal Government's tax revenues and are available to all Canadian residents. These benefits are paid once you reach age 65. For more details, you can visit the Service Canada website at

Part-time Factor

If you work full-time, the part-time factor is 100%. If you work part-time, we ask for the percentage of full-time that you are currently working e.g. 50% if you work half-time.

Past Service Purchase

From time to time you may have an opportunity to restore pensionable service that you did not earn when you went on leave, such as maternity leave. You can contact the Pension Corporation to find out if you are eligible and how much it would cost to purchase this past service.

Payroll Deductions

Payroll deductions include contributions to the Canada Pension Plan (CPP), Employment Insurance, union dues, income taxes, and pension contributions.


Your pension is based on the annual rate of your earnings averaged over 60 months and your pensionable service. Your pension does not include any overtime or benefits you may receive while employed.

Pension Corporation

The Pension Corporation administers the five main BC Public Service pension plans. These are the College Pension Plan, Public Service Pension Plan, Teachers Pension Plan, Municipal Pension Plan and WorkSafeBC.

Pension Service

Pensionable service is the time you have spent working in years and months as a member of a pension plan. It is used to calculate how much pension you will receive when you retire. The more service you have, the more you will receive. You get credit for pensionable service by contributing to your pension plan while you work.

Pensionable Earnings

Pensionable earnings usually means your base salary. Your pension is based on the annual rate of earnings, averaged over 60 months, and your pensionable service.

Pensionable Service

Pensionable service is used to calculate the amount of your pension. It takes into account the complete or partial years of employment service you have accrued by retirement. Pensionable service is measured in years, months and days. You get 1 day's pensionable service for every day that you earn a pension either by contributing, or while on an approved disability, or through a buy back of past service.

Person Profile

A Person Profile is a report that shows the earnings and service for each year a member is in a pension plan.


In order to purchase an annuity or insurance policy, you are required to pay regular payments, or premiums.

Reciprocal Agreement

Reciprocal Agreements allow you to move from one employer to another and be able to transfer your pension entitlements. Not every employer has one of these agreements but most of the Public Service employers do.

Retirement Index

A Retirement Index is one way of measuring how prepared you are for retirement. An Index of 100 indicates that you can live as well in retirement as you have while working.


RRSP stands for Registered Retirement Savings Plan. It is a personal savings account that you can make deposits and get a tax refund. But you have to start withdrawals before you are age 72.


Service refers to the time of your employment service.

Service Canada

Service Canada is the federal government organization that administers your government pensions: Canada Pension Plan and Old Age Security. The Service Canada website has a lot of useful information about your government pensions and in most cases you can apply for benefits online. For more information go to:

Survivor Benefits

If you have a spouse, when you retire you must elect a form of pension that includes a survivor pension payable upon your death to your spouse. This survivor benefit then becomes payable to your surviving spouse for their lifetime.

Take Home Pay

Take home pay refers to how much of your employment income remains after you have paid taxes to the government, contributed to your pension plan, and paid union dues etc.

Tax Rate

Your tax rate refers to the rate of tax you pay on your income. It depends on how much of your income is taxable and where you live in Canada. According to Federal tax rates, the highest tax rate is 33% on annual income over $202,800. However, if your income is less than prescribed amounts you may pay no income tax. For more information, visit

Terminate Employment

Your pension is only available to you when you terminate employment or retire. The benefits available to you will depend upon what age you terminate.

Unreduced Age

Your unreduced age is the age at which you can retire and receive the full formula pension without any reduction. This is typically age 60 but some plans are changing this age to 65. For public safety occupations, the unreduced age is 55.