Pensionable Service

What Is Pensionable Service?

Pensionable service refers to the amount of time a worker accrues credit toward a pension plan in which they are enrolled. Under Canadian law, an individual can accumulate up to a total of 35 years of pensionable service.

Understanding Pensionable Service

Pensionable service is the amount of time a worker enrolled in a pension plan accrues toward that plan during their employment. Typically reported on statements as a yearly figure, pensionable service is one of the primary factors in determining a worker’s pension benefits, along with the highest average salary.

The pensionable service value calculated for each worker is most commonly based on the employer's record of time worked, as expressed in hours, years, or other intervals. Each pension plan differs in calculating pensionable service, so it is imperative that plan participants familiarize themselves with the specific terms of their plan.

The period during which a worker contributes pensionable service directly to a pension plan is known as "current service".

In addition to accruing current service, an individual may add eligible prior service to increase their pension, which can be done by purchasing pensionable service for eligible periods of prior employment, or by transferring the value of accrued pension benefits from another employer's plan via a Pension Transfer Agreement.

Pension Transfer Agreement

A Pension Transfer Agreement is an agreement negotiated between an eligible employer and the Canadian government that facilitates the transfer between pension plans.

An employer must have entered an official agreement with the Government of Canada for an employee to take advantage of a Pension Transfer Agreement. As of 2021, more than 90 pension plans participate in Pension Transfer Agreements in Canada. An employee whose pension does not have an active Pension Transfer Agreement can petition their employer to enact an agreement, or they may explore the option of a service buyback program.

Buying Back Pensionable Service

For some Canadians, pensionable service figures may also include periods of purchased service as a benefit of the Public Service Superannuation Plan. Also known as service buyback, the purchase of pensionable service must be calculated using a Past Service Pension Adjustment and certified by the Canada Revenue Agency before being counted.

Types of pensionable service that can be eligible for purchase include prior public service, periods of service in which a member was not contributing to a pension plan, and service recognized by other pension plans. Such purchases are subject to the rules of the Canada Revenue Agency, and terms vary between plans and provinces.

Additional requirements and costs may be applied to a service buyback, and the 35-year accrual limit on pensionable service applies.