*It was expected that Bill 43 would receive Royal Assent (Approval) when the Legislature reconvened in the fall. However, since the Throne Speech was moved up to October 7th, the bills that were being discussed during the spring session have been put on pause. Because of this, the status and timing of Bill 43 is unclear at this time.
If you have a CSSB pension, there could be significant changes coming that will affect how the commuted value of your pension is calculated.
As I’ve mentioned in the past (Pension or Lump Sum, How to Decide), you will have a choice to make upon your retirement as to how you would like to receive your pension. You can elect to receive a monthly payment, or you can choose to commute your pension and receive a cash payout instead.
The option to commute your pension has become extremely attractive over the last few years as lower interest rates have resulted in higher payouts. This may not be the case moving forward.
What is happening?
*Check out the webinar I did on this here
Bill 43 (the Civil Service Superannuation Amendment Act) was introduced on March 19th at the Manitoba legislature. This bill contained a few amendments, but the one I wanted to focus on today was relating to how the commuted values are calculated for this pension.
The proposed changes would use a different method to calculate the commuted value. This method would result in payments being 1/3 to 1/2 less than under the current method as per the CSSB.
The bill is currently in its second reading, and once it receives Royal Assent (approval), the new rules will immediately go into place. It’s difficult to say when this bill will pass as it is receiving some pushback, but from my understanding, it seems that it is being pursued aggressively by those who brought it forward.
Why is this happening?
The CSSB pension is currently underfunded, and by reducing the lump sum amounts being paid out, the pension’s funded status and long term stability would improve. If these withdrawals are allowed to continue, retirees who are receiving a monthly benefit could see their payments reduced. We could also see contributions increase for current members of the plan.
Why should this matter to you?
If you were planning on withdrawing the commuted value from your pension, this option would not be as favorable if the bill passes. There has been no schedule to announce that the legislation will sit again before the fall session, but that’s not to say that it won’t happen over the summer. As mentioned, it seems that this bill has been aggressively pursued by those who brought it forward.
If you were planning to retire within the next few years and were set on taking the commuted value from your pension, now may be a good time to look at your options.
For additional information visit: https://www.cssb.mb.ca/bill-43
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Marc Sabourin is a Winnipeg based Financial Advisor and Retirement Specialist with Harbourfront Wealth Management. His specialty is working with pre-retirees and retirees who are looking for retirement, investment, & tax advice.
Disclaimer: The views expressed are those of Marc Sabourin, Certified Financial Planner, and Investment Advisor and not necessarily those of Harbourfront Wealth Management Inc., member of the Canadian Investor Protection Fund