McGill University Pension Plan Retirement Information Session

Transcription

1 The presentation can be accessed online at: McGill University Pension Plan Retirement Information Session

2 2 This presentation is intended to inform you about the McGill Pension Plan & the importance of integrating pension investment decisions to your financial management. This is not financial advice & should not be taken as such. It is meant to alert you to the matters to look into. Your individual needs & circumstances may not be adequately addressed by the info contained in this presentation.

3 3 Learning Objectives Understand the importance of planning your retirement; Identify the settlement options available to you & the decisions you need to make; Understand the need to review your investment strategy; and Learn which benefits are offered postretirement and eligibility requirements; Learn where to get more information.

4 4 Why save for retirement? because you could spend ½ your life retired. 35+ working years years in retirement Career Begins Current Average Age 23 Retirement Age 61 Current Life Expectancy of a 60 year old: MALE = age 86.9 increasing to age 94.5 FEMALE = age 88.9 increasing to age 95.5

5 Projected Life Expectancy Average Life Expectancy Male Female Source: CPM2014 Publ Improvement Scale B Age Maximum Recorded Life Expectancy: 122 years Jeanne Calment (France)

6 6 Will I have enough in retirement? Forecast spending needs in retirement Forecast after tax income from all sources Determine the gap between needs & income Determine additional savings needed by target retirement date

7 Inflation & Purchasing Power 7 Assuming an inflation rate of 2.5% Income 10 years 15 years 20 years 25 years 30 years $30,000 $38,403 $43,449 $49,158 $55,618 $62,927 $50,000 $64,004 $72,415 $81,931 $92,697 $104,878 $70,000 $89,606 $101,381 $114,703 $129,776 $146,830

8 8 Where do retirees get their income? MUPP* (employer sponsored) Designed to replace approximately 49% of pre retirement income Government Plans OAS (12%) QPP (24%) Personal Savings RRSP/Group RSP TFSA * based on a pre retirement income of $55,300 at age 65, annualized rate of return of 5.5% and interest rate assumption of 5.0% at settlement.

9 9 You can view your Statement of Participation on the Retraite Quebec website: ervices/services_en_ligne/pag es/releve_participation.aspx or you can request one by telephone. Source: Guide to financial planning for retirement Edition

10 Source: Guide to financial planning for retirement Edition 10

11 Quebec Pension Plan (QPP) 11 actuarial reduction factor of 0.6% for pensions starting prior to age 65 pensions starting after age 65 will increase by 0.7% for each month the start of pension is delayed up to age 70.

12 12 QPP 2017 (based on maximum monthly payments) Start Age Year Born Adjustment Reduction Rate Amount X % 64.00% $ X % 71.20% $ X % 78.40% $ X % 88.00% $ X % 94.00% $1, N/A N/A % $1, X % % $1, X % % $1, X % % $1, X % % $1, or over X % % $1,582.12

13 When should I start my QPP? 13 Net Present Value (NPV) of pension stream (approximation only) NPV at age Start age 60 Wait to age 65 Wait to age $102,355 $100,368 $71, $124,515 $134,994 $120, $143,220 $164,220 $161, $159,009 $188,890 $196, $172,336 $209,713 $226,402 Assumptions: 2017 rates, maximum annual pension + 1.5% indexation, discount rate 5%, excludes QPP death benefits and surviving spouse s pension considerations

14 14 Old Age Security (OAS) Age of eligibility 2016 budget: restored to age 65 Voluntary deferral of the OAS available since July 2013 defer OAS pension by up to five years enhanced monthly benefit of 0.6 percent per month of deferral *Income above $74,789 (in 2017) subject to clawback = 15% of the excess

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16 16 Types of Pension Plans Defined Benefit Pension is based on a formula tied to service & salary Defined Contribution Pension is based on contributions, the investment return accumulated at retirement as well as market conditions

17 17 McGill University Pension Plan Defined Contribution Plan Hybrid Plan Applies to members who became eligible to join on or after January 1, 2009 Referred to as Part B of MUPP Applies to members who joined prior to January 1, 2009 Defined Contribution + Defined Benefit = Hybrid Referred to as Part A of MUPP

18 Tracking your progress 18 McGill University Savings Program website: login Record Keeper: Morneau Shepell Login using your McGill username & password Site provides access to: Account balances, included defined benefit (Part A) Investor Profile Questionnaire Personal & Fund Rates of return Retirement Income Calculator etc. If you forget your username or password, contact the IT Customer Support Help Desk at or for assistance.

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20 20 Market Value of DC pension holdings Value of GRSP holdings (AVCs and RSPs are excl. from DBM calc.)

21 21 DBM accrued to current date but payable at NRD Transfer value of the DBM Estimated DBM Supplement

22 Defined Benefit (DB)Minimum Supplement = transfer value relative performance of the Balanced Account (Part A hybrid plan only) 22 If not in Defined Benefit supplement position at cessation, DB minimum ends Subject to: Maximum DB Limit Maximum Transfer Limit part or all of payment may be subject to taxation Member contributions if > 50% of DB pension value will be refunded at the time of settlement

23 Retirement Income Calculator available online! 23

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25 25 When can I retire? No mandatory retirement age in Quebec Normal Retirement Date ( NRD ) Last day of the month in which you reach age 65 Early Retirement Date You may retire as early as age 55 Delayed Settlement Must settle your account no later than the December 31 st of the year in which you reach age 71

26 26 Steps to take to retire Provide notice of retirement in writing: Admin & Support advise your immediate supervisor Academic refer to Regulations or Academic Personnel Office personnel office Ensure your area submits a Notice of Status Change to Central HR Attend the Settlement Options & Decumulation Information Sessions Once Pension Plan record keeper receives your last contributions, they will issue a settlement package to you you can settle or defer settlement

27 Further information please register for a Settlement Options Information Session A brief overview of settlement options. For more information, please sign up for a Settlement Option Information Session.

28 28 Retirement vs. Settlement You can retire from the University without having to settle your MUPP holdings = defer settlement Ability to settle MUPP holdings: Earliest of termination, retirement or the month following the one in which you turn 65 or Latest: December 31 st of the year in which you turn 71.

29 29 Can I cash out my pension plan? Subject to locking in provisions! Lump Sum Cash Payment is available if: a) Value < 20% of YMPE in year or termination, or b) If over age 65 and total value in DC, LIF, LIRA < 40% of YMPE, or c) Non Resident (Canada) for at least 2 years.

30 30 Settlement Options Purchase an external annuity Defer Settlement (latest age 71) MUPP Combo annuity & LIF/LIRA Group LIF LIRA or LIF LIRA: locked in retirement account LIF: life income fund

31 31 What is a retirement income? Variable income streams Life Income Funds (LIF) Registered Retirement Income Funds (RRIF) Pension income streams QPP + other Gov t programs Annuities Defined benefit pensions Variable income streams with guarantees

32 Settlement options providing a retirement income 32 Annuity Exchange fixed amount for a future stream of payments Income amount is fixed at onset Offers protection from outliving capital Various optional forms of annuities LIF Subject to minimum & maximum annual withdrawal limits You assume investment risk & decide how to invest Rate of return is dependent on investment mix May convert to an annuity At death, LIF balance no longer locked in. RIF For non locked in holdings No withdrawal limits

33 Investments 33 De risk portfolio as one approaches retirement date Do it yourself Target Date Funds (Life Cycle) Glide path Consider different strategy if favoring annuity versus Life Income Fund (LIF)

34 What is your risk tolerance? 34 WILLINGNESS to take on risk ABILITY to take on risk NEED to take on risk Most investor profile questionnaires are tailored to assess willingness and focus on the accumulation phase.

35 What are the risks in retirement? 35 LONGEVITY RISK outlive capital RATE OF RETURN RISK Overly aggressive or conservative asset allocation INFLATION RISK

36 Your investment responsibility 36 Understand the decisions that you need to make and select investment option(s) which are right for you. Review your investment portfolio & investment strategy Seek independent investment tax advice

37 37 Can I transfer existing LIRAs/RRSPs to the MUPP? Advantages Access to MUPP investment fund options Management Expense Ratio on MUPP investment funds Disadvantages May not access funds prior to retirement/termination No Home Buyers Plan & Lifelong Learning Plan withdrawals permitted Limited investment fund options Fees may be levied by transferring institution & possible Costs associated with liquidating holdings Also option of transferring into the Group RSP.

38 For more information: coverage

39 Post Retirement Benefits 39 McGill provides the following post retirement benefits: Supplemental Health Plan Dental Plan Life Insurance Plan

40 Eligibility Requirements 40 Minimum age 55 Minimum 10 years continuous service Participated in the benefit plans for a minimum of 10 consecutive years

41 41 Supplemental Health Plan Cost sharing is: 70% paid by retiree & 30% paid by McGill Coverage you have at time of retirement can be continued (pensioner/university) Eligible dependents can continue coverage Spouse can continue coverage upon death of pensioner

42 42 Coverage Supplemental Health Plan Coverage identical to that of actives (such as hospitalization, travel, physiotherapy etc..) Exception: Prescription drugs not covered at age 65 and over (refer to slide on Drug Plan)

43 43 Residency Requirements Supplemental Health Plan Must be a resident of Canada Coverage is dependent on eligibility for Medicare (RAMQ)

44 44 Travel Insurance Supplemental Health Plan Out of country coverage Emergency medical expenses Coverage includes pre existing conditions Medical condition must be stable 90 days per trip 100% reimbursement of eligible expenses For more information:

45 45 Quebec Drug Plan RAMQ At age 65, Quebec residents will be automatically registered with RAMQ Drug Plan Dependents under 65 must also be covered by the RAMQ Drug Plan; contact the RAMQ to register McGill Health Plan may cover drugs not listed on RAMQ formulary

46 46 Dental Plan Cost is paid 100% by retiree Coverage you have at time of retirement can be continued Eligible dependents can continue coverage Spouse can continue coverage upon death of pensioner New employees hired as of January 1, 2010 not eligible to continue dental plan at retirement

47 47 Dental Plan continued No residency requirements Plan reimburses expenses based on Quebec Fee Guide for General Practitioners Same plan for actives and pensioners

48 Life Insurance Coverage continues at retirement 48 Basic Coverage Until age 65: ½ X pre retirement salary to $50, : ½ X pre retirement salary to $30,000 McGill pays 100% Optional Coverage Can maintain insurance purchased before retirement Maximum = $100,000 Pensioner/retiree pays 100% Rates based on age Can reduce coverage at any time

49 49 For more information Pension Plan Brochures ( Benefits Website ( McGill University Savings Programs Call Centre: Web Site: Phone: One on one: 688 Sherbrooke St. West Suite 1420 Independent investment advisor or financial planner Information Sessions: General, Settlement Options, Decumulation

50 Other information sessions 50 Session Dates (until May 2018) General Jan 29, Feb 26, Mar 26, Apr 30, May 28 Settlement Options Jan 15, Feb 12, Mar 12, Apr 16, May 14 NEW Decumulation Jan 8, Feb 5, Apr 9 Group RSP Jan 11 Dates, times, locations & registration tool on our web site: McGill University Retirees Association: arum.association.mcgill.ca/