Early retirement

Retiring before the normal retirement age will affect your pension. Here are the key points to consider.

Deciding whether a temporary annuity is right for you

Your early retirement pension consists of your lifetime pension payment, the bridge benefit (for service earned before April 1, 2018) and an optional temporary annuity. A temporary annuity is a top-up to your pension. It increases your monthly payment until you reach age 65 or your death, whichever comes first.

Why choose a temporary annuity?

  • Buying a temporary annuity may help you meet the initial expenses of retirement, such as paying off a mortgage before you turn 65
  • If you choose a reduced pension, a temporary annuity would increase your monthly pension payments until age 65
  • For those with significant taxable assets such as RRSPs, a temporary annuity can help lower your income after age 65 and therefore reduce tax on income

Important things to keep in mind:

  • A temporary annuity will reduce your lifetime pension. The younger you are when you retire, the bigger the impact on your pension after age 65
  • A reduced lifetime pension might have a significant impact on your spouse or dependants
  • The temporary annuity amount is based on the maximum old age security (OAS) benefit. Amounts may change from year to year to reflect fluctuations in the OAS, but your payments will remain stable from your retirement date onwards

You can use the personalized pension estimator in My Account to see how a temporary annuity would affect your basic lifetime pension. This will help you determine what your pension amount will be before and after age 65.

If you select the temporary annuity option, you can choose either the full or the half temporary annuity. The full temporary annuity is based on the maximum old age security (OAS) benefit, and temporary annuity amounts may change periodically to reflect changes in the OAS. If you choose a half temporary annuity, the top-up to your monthly pension payment is half the amount of the full temporary annuity. Because the top-up is smaller, your lifetime monthly pension decreases less.

Here is an example of what these options could look like for a member retiring at 56 years old with a pension effective date of November 1, 2019, where their:

  • Lifetime pension = $2,100
  • Half temporary annuity = $300
  • Temporary annuity = $600
Option Temporary annuity amount Pension payable to age 65* Pension payable after age 65
No temporary annuity $0 $2,100 $2,100
Half temporary annuity $305 $2,276 $1,971
Temporary annuity $610 $2,452 $1,842

*Please note that this amount does not include a bridge benefit.