Turn Back the Clock, Wind Up Work Earlier

When we are young, we all do things we later regret – including perhaps not contributing to our pension. The great thing about HOOPP is that you can, in effect, turn back the clock and get back yesterday’s service to build a bigger pension today. And, depending on how you pay for the service, you may even get a bigger tax refund. Here’s how.

Let’s say a while ago you worked at a HOOPP employer for two years when going to clubs was more important to you than joining the Plan. It happens. You can’t recapture your youth, but you can buy that service. If you use cash, you’ll not only increase your pension, you may increase your tax refund. Let’s look at an example.

Joan is 42, she’s been in the Plan 10 years and has average annualized earnings of $57,000. If she buys back the two years she spent dancing to Girls Just Want to Have Fun in her off hours, it will cost her approximately $11,600, which she will pay in cash. Because she is paying with cash, her purchase is tax deductible and her income tax refund may increase as a result – she’ll have to consult her accountant to find out exactly how much.

Plus, look what happens to her pension, assuming she continues to earn $57,000 per year until she retires:

If Joan retires at 60 and lives to 84, her $11,600 will have brought her $44,760 in additional pension benefits – not including any COLA increases she will receive and assuming she makes the same earnings until she retires.

If Joan doesn’t have the cash or the RRSP room, she can use funds within her RRSP to make the purchase. No increased tax refund, but the same pension boost.

If Joan hesitates, the cost of her purchase will go up with each passing year. That’s because the value of your HOOPP pension increases as you get closer to retirement – so buying back past service becomes more costly as your age and salary increase.

Do you have a period that’s eligible for past service purchase?

Act before the end of the year, pay with unregistered funds, and you’ll be increasing not only your pension, but possibly your income tax refund as well.

To get an idea of what your past service purchase could do for your pension, check out the Buy Back Service pages of website, or ask your employer for a copy of the booklet A Guide to Past Service Purchases. You can obtain the forms to request an estimate from both the website and the booklet.

Transfer in benefits built at other plans – another way to build service

Daniel Levac, Senior Vice-President, Corporate Services and CFO at the Sisters of Charity of Ottawa Hospital looked carefully before transferring his nearly 20 years of service with another employer’s plan into HOOPP, when he joined his present employer last December. “The question was would I be better off with two pensions or one pension at my target retirement ages.”

He took his question to an expert. An actuarial evaluation made it clear putting all his pension with HOOPP was in his best interests. “I’d encourage anyone who has service in another plan to look into this and get expert advice.”

Here’s what members say:

“I had my financial advisor run the figures and he said, ‘do it!’ It meant emptying the piggy bank (her RRSP), but it’s worth it. I had help from my Field Service Rep, Glenna Fox-Keip, and things went very smoothly once I authorized my financial advisor to speak to HOOPP directly. My advice to other members is, ‘do it!’ It’s one of the smartest things you can do for yourself to provide for a secure retirement. It’s an indexed pension and it’s for life.”

Sue Southwell
Executive Assistant
Waterloo Wellington Health Integration Network

“My wife and I are both members of HOOPP and both had service available for purchase. We gathered our information together and went to see our financial advisor. He highly recommended going ahead, because of the long term guaranteed benefit. I’m not sure if people aren’t aware of past service purchase, or if they don’t start to think about these things until they get to thinking about retirement. The key issue is to buy it earlier, rather than later, because the cost increases – it’s still really worthwhile, still a great thing to do, but the sooner you do it, the better.”

Wayne Auchinleck
Purchasing Portfolio Manager
Sudbury Regional Hospital

“I’ve been in the Plan since 2004. I heard about past service purchase through our benefits administrator. She explained that it was better to put a lump sum in my pension than in my RRSP, and that it was more cost effective to do it now, than to wait until I’m older. I bought back time where I had worked for a HOOPP employer, but wasn’t in the Plan. Not only will my pension increase, but my early retirement reductions will go down.”

Patricia Beard
Registered Nurse
Southlake Regional Health Centre

Please note: Each person’s financial circumstances are different. When members are considering a past service purchase, HOOPP encourages everyone to consult with their financial advisor and tax preparer to assess tax and retirement income implications of their purchase.

Fall 2007