Choosing a Form of Pension


What are "forms" of pension?

Pensions come in different shapes and sizes called "forms." This means you can tailor your pension to meet your particular needs.

Choosing a form of your pension is one of the most important decisions you will make about your pension. Your decision is irrevocable once your pension payments have begun. That is, once you've elected an option and retired from employment, the Plan does not allow a change in the form of your pension. You may wish to speak with a financial planner or other retirement professional who can help you decide which form of pension is best for you.

Normal Form

The normal form is a Single Life pension guaranteed for five years. The pension is paid for the rest of your life following your retirement, and if you die before the end of the guaranteed term, the pension will continue to your beneficiary or estate until the guarantee expires. Remember that the guarantee term begins on your date of retirement, not your date of death.

Optional Forms

Optional forms of pension are the actuarial equivalent of the normal form pension. This means that the amount of pension payable to you in an optional form is adjusted so that it is equal in value to the single life pension guaranteed five years.

The optional forms allow you to change the guarantee period or the amount of the survivor benefit to your spouse. It is important to keep in mind that, in general, the longer the guarantee period, or the larger the survivor benefit you want for your spouse, the smaller your monthly pension payments will be.

Optional forms include:

  1. Members without spouses or whose spouse has signed a waiver:

    If you are single or your spouse has waived their entitlement you may choose a:

    • Single Life pension guaranteed for 10 years; or
    • Single Life pension guaranteed for 15 years.
  2. Under both options your pension is paid for your life and guaranteed for either 10 or 15 years, whichever term you select. If you die before the end of the guaranteed term, the pension will continue to your beneficiary or estate until the guarantee expires.

    If you choose an optional Single Life form of pension, your monthly pension payment will likely be less than if you had elected the normal form pension. This is because pensions payable in an optional Single Life form are guaranteed to be paid for a longer period of time.

  3. Members with spouses:

    If you have a spouse on the date of retirement, unless your spouse waives their entitlement, you are required to elect to receive your pension in a form where no less than 60% is payable to your spouse for life following your death.

    Instead of the legislated minimum Joint Life 60% survivor pension with no guaranteed period, you may choose a:

    • Joint Life 60% survivor pension guaranteed for 5, 10, 15 years;
    • Joint Life 75% survivor pension guaranteed for 0, 5, 10, 15 years;
    • Joint Life 100% survivor pension guaranteed for 0, 5, 10, 15 years.

    Under all three Joint Life options, your pension is paid for life. On your death, the percentage you select will continue to your surviving spouse for life.

    To this, you can add a guaranteed term of 5, 10, or 15 years. If you die before the end of the guaranteed term, your pension will continue to your surviving spouse until the end of the term. At the end of the guaranteed term the pension reduces to the survivor percentage you selected at retirement.

    If you and your spouse both die before the end of the guaranteed term, pension payments remain payable until the end of the guaranteed term. Settlement of the balance of the guaranteed pension payments is determined based upon whether you or your spouse dies last.

    If you choose a Joint Life form of pension, your monthly pension payment will likely be less than if you had elected the Single Life normal form pension. This is because pensions payable in a Joint Life form provide for pension payments to be continued to your spouse for life following your death, and, if elected, may also be guaranteed for a longer period of time.

To assist in your retirement planning, SHEPP offers a pension estimate calculator through SHEPPWeb that provides estimated pension amounts for each pension form. However, keep in mind that these are estimates only and actual pension amounts may vary. For help using this calculator, watch the How to Estimate Your Pension on the Video Tutorials page.

How does SHEPP define a spouse?

A spouse is:

  • a person to whom you are legally married at the relevant time; or
  • if you are not married, a person with whom you are cohabiting as spouses at the relevant time and who has been cohabiting continuously with you as your spouse for at least one year prior to the relevant time.

"Relevant time" refers to the date of death with respect to the pre-retirement death benefit, and the date of retirement with respect to the post-retirement survivor benefit.

If you have a spouse as defined above when you retire, you must choose at minimum the Joint Life 60% form of pension unless your spouse has waived their entitlement by signing the Spouse's Waiver of 60% Post-Retirement Survivor Benefit form.

If my spouse passes away and I remarry in retirement, will my new spouse receive the benefit when I die?

Only your spouse on date of retirement is entitled to Joint Life survivor benefits.

What if I want any benefit payable to go to my children when I die?

You may designate your children as beneficiaries. However, they would only receive a post-retirement survivor benefit if:

  • you are not survived by a spouse or your spouse has waived their entitlement; and
  • you elected a form of pension that included a guaranteed term and that guarantee has not yet expired.

When and how do I choose which form of pension I want?

You must elect a form of pension by completing and returning the form to SHEPP by the specified date.

At retirement, SHEPP will provide you with a retirement package that shows the amount of pension payable to you in the normal and optional forms of pension available under the Plan. In addition, SHEPP will provide the Spouse's Waiver of 60% Post-Retirement Survivor Benefit form.

 
MEMBER WITHOUT A SPOUSE (OR MEMBER WHOSE SPOUSE HAS SIGNED A WAIVER)
 
 
NORMAL FORM
 
 
OPTIONAL FORMS
 
Single Life pension guaranteed for 5 years: Single Life pension guaranteed for 10 years: Single Life pension guaranteed for 15 years:
  • paid for your life;
  • guaranteed for 5 years;
  • if you die before the end of the guaranteed term, your pension continues to your beneficiary until the guarantee expires.
  • paid for your life;
  • guaranteed for 10 years;
  • if you die before the end of the guaranteed term, your pension continues to your beneficiary until the guarantee expires.
  • paid for your life;
  • guaranteed for 15 years;
  • if you die before the end of the guaranteed term, your pension continues to your beneficiary until the guarantee expires.
 
MEMBER WITH A SPOUSE
 
 
OPTIONAL FORMS
 
Joint Life 60%: Joint Life 60% guaranteed 5, 10 or 15 years: Joint Life 75% guaranteed 0, 5, 10 or 15 years: Joint Life 100% guaranteed 0, 5, 10 or 15 years:
  • paid for your life;
  • on your death, 60% continues for your surviving spouse's lifetime.
  • paid for your life;
  • on your death, 60% continues for your surviving spouse's lifetime;
  • if you die before the end of the guaranteed term you select, the pension continues to your surviving spouse until the end of the term; then it reduces to 60% for your surviving spouse's lifetime;
  • paid for your life;
  • on your death, 75% continues for your surviving spouse's lifetime;
  • if you die before the end of the guaranteed term you select, the pension continues to your surviving spouse until the end of the term; then it reduces to 75% for your surviving spouse's lifetime;
  • paid for your life;
  • on your death, 100% continues for your surviving spouse's lifetime;
  • If your spouse predeceases you, and you die before the end of the guaranteed term you select, your pension continues to your beneficiary until the guarantee expires.
  • If having survived you, your spouse dies before the end of the guaranteed term, the balance remaining on the guaranteed term of pension payments will be commuted and paid to your spouse's estate.