Overview
The PEPP Variable Pension Benefit (VPB) is one of the retirement income options available to you as a Plan member. It is paid directly from your defined contribution pension plan (PEPP).
The VPB provides you with scheduled or lump-sum payments from your PEPP VPB account that can vary based on your needs. It is designed to provide you flexibility and control over when and how much retirement income you withdraw and choice over how the money is invested.
How the Variable Pension Benefit (VPB) Works
A Variable Pension is a retirement option paid directly from a defined contribution pension plan. The VPB is similar to outside options such as prescribed Registered Retirement Income Funds (pRRIFs). Your investment earnings continue to grow on a tax-sheltered basis.
The VPB allows you to draw on your money while also staying in PEPP. This provides you the continued advantage of PEPP's low fees, investment options, and dedicated service.
Your VPB account remains open until the balance reaches $0.00, at which point the account is closed.
Investment options
PEPP has eight investment options. These funds offer a mix of asset classes, which are made up of equities, alternatives and income.
Asset Allocation Funds | Specialty Funds |
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You can invest in one Asset Allocation Fund at a time, and add one or both of the Specialty Funds. You may also invest solely in the Specialty Funds.
Longevity
The VPB does not guarantee investment returns, income levels, or how long your money lasts. If longevity and running out of funds are a concern, you can use your VPB account to purchase a PEPP Lifetime Pension that provides a dependable, monthly income for your lifetime.
Payments
The VPB has flexible payment options to suit your financial needs. You can receive monthly, annual, or lump-sum payments, and you can withdraw any amount (less tax) at any time.*
Payments from your VPB account are paid directly to your Canadian bank account through Electronic Fund Transfer.
Payments are made by redeeming units from your investment option(s). The number of units redeemed at payout or transfer is calculated using the unit value in effect the day of payment.
If you have more than one PEPP investment option, you must supply payment instructions to PEPP. The default when there is more than one investment option is to pro-rate payments based on the account balances.
*The minimum payment amount is $100.00 (before tax).
Scheduled payments
Scheduled payments are made on the last banking day of the month. Payment schedules remain in effect until you notify us of a change.
You may request one free change to your scheduled payments in each fiscal year (April 1 - March 31). A $30.00** fee is charged for each subsequent change within the fiscal year.
You may request a lump sum at any time. You are entitled to one free lump-sum payment per fiscal year. A $60.00** fee is charged for each additional lump-sum payment request within the fiscal year.
All transactions completed on your online member account are free of charge.
**Fees effective April 2022. Fees are subject to change.
Age 72 required minimum withdrawals
Canadian Income Tax Regulations requires you begin minimum withdrawals from the VPB beginning the calendar year you reach age 72. You are not required to withdraw all your funds, and the remainder can remain in the VPB.
The minimum annual withdrawal is calculated each January 1 based on a prescribed factor using your age. Any balance of the requirement minimum not withdrawn by December 31 is automatically deposited to your bank account.
Income tax
The VPB is tax-sheltered and tax-deferred, meaning you do not pay tax on your investments and earnings until you begin to withdraw money. PEPP withholds income tax from your payments and forwards it to the CRA on your behalf.
You will receive a T4A reporting your withdrawals and income tax paid for the calendar year, for use in your personal income tax filing. Tax liability is ultimately your responsibility, and the Canada Revenue Agency (CRA) is considered the gold-source for tax questions.
Transferring money in and out
A benefit of the VPB is you may transfer other eligible registered money into your VPB account. Eligible monies include:
- RRSPs and RRIFs;
- spousal RRSPs if you are the annuitant;
- other registered pension plans (RPP) subject to approval; and
- pRRIFs, LIFs, and LRIFs or another approved variable benefit account
You can transfer all or a portion of your money out of the VPB account to an eligible registered account at any time.
All transfers in and out must qualify for administration under The Public Employees Pension Plan Act. Your spouse (if applicable) must sign a Spouse’s Consent for Member to Transfer Outside Monies into the Variable Pension Benefit (VPB) form prior to all transfers into VPB from a locked-in source.
Beneficiaries and spousal waivers
Death benefit
The death benefit for the VPB is your pension account balance. The balance is payable to your spouse (if applicable) as a Specified Beneficiary, or to an Other Beneficiary.
Beneficiaries
If you have a spouse, that person will be the beneficiary of 100 per cent of the death benefit. If you choose to designate someone other than your spouse as a beneficiary, your spouse must waive rights to all or a portion of the survivor benefit by completing a Spouse’s Waiver of Designated Beneficiary Status form. This will allow you to designate all or a portion of the death benefit to a beneficiary(ies) other than your spouse.
If you have no beneficiary designated and no spouse, the account balance will go to your estate.
Definition of Spouse
Your spouse is the person to whom you are legally married; or if you are not married, the person with whom you are living in a conjugal relationship, and to whom at least one of the following situations applies. Your spouse:
- has been living with you in a conjugal relationship for at least 12 continuous months;
- is the parent of your child by birth or adoption; or
- has custody and control of your child (or had custody and control immediately before the child turned 19 years of age) and your child is wholly dependent on that person for support.
A spousal relationship with someone to whom you are legally married ceases upon divorce.
A spousal relationship with someone to whom you are not married ceases upon a separation of at least 90 days due to a breakdown in your relationship. The individual resumes being your spouse if you resume living together in a conjugal relationship for a NEW period of at least 12 continuous months.
A married spouse takes priority over another person even if that person meets the definition of a spouse. You cannot have more than one spouse at any given time. Under the Plan rules, you are still legally married if you are separated but not divorced.
If you divorce, Plannera requires proof of divorce, such as a certified copy of the divorce certificate or Decree Absolute.
Spousal waiver and consent
If you have a spouse, your spouse must complete a Spouse’s Consent and Waiver of Post‑Retirement Survivor Benefits form at the time of your application for VPB. According to The Pension Benefits Act 1992, a surviving spouse is entitled to a minimum 60 per cent survivor benefit from a pension. A VPB cannot provide that guarantee to your spouse. By signing the spousal waiver, your spouse confirms to PEPP that he/she is fully aware that you may withdraw all the money in your pension account which could leave $0.00 in the event of your death.
The waiver must be signed by the spouse outside the immediate presence of the member. The spouse’s signature must be witnessed by an adult who is not the member. The waiver must also be completed no more than 90 days prior to the application for the VPB.
Specified Beneficiary Options
You may only designate your spouse as a specified beneficiary. The specified beneficiary cannot waive any portion of the beneficiary rights - he/she will receive 100 per cent of your account balance.
The specified beneficiary on file has these options upon the member’s death:
- continue the VPB within PEPP;
- transfer all or a portion of the VPB to another registered retirement account;
- purchase an annuity; or
- take a lump-sum payout less withholding tax.
Upon the death of the member, the specified beneficiary (your spouse) must choose an option for the account and inform PEPP by the end of the year following the member’s death. For example, if the member dies in September 2009, PEPP must be informed of the decision by December 2010. Your spouse would have full access to the account during that time.
Other Beneficiary Options
Your children, your estate, or any other person or agency may be designated as other beneficiaries. You may name your spouse as an other beneficiary if he/she has not been designated as a specified beneficiary or has waived a portion of his/her beneficiary rights.
Other beneficiaries (other than a spouse) must take a lump-sum payment less withholding tax as soon as is practical after the member’s death. A spouse listed as an ‘other’ beneficiary may make a request for a tax-deferred transfer to another registered account as well as request a lump-sum payment. Your spouse would not be able to continue the VPB account in PEPP when listed as an other beneficiary.
Payments cease upon your death when there is no specified (see previous section) beneficiary.
If you name someone under the age of 18 as a beneficiary, you must name a trustee. A trustee is an individual or legal entity responsible for controlling the assets.
Benefits & Considerations
Here are the key advantages of the Variable Pension Benefit:
Continuity of service
The VPB allows you to draw on your money while also staying in PEPP. This provides you the continued advantage of PEPP's low fees, investment options, and dedicated service.
Peace of mind
PEPP's steady and strong fund growth has helped your money grow throughout your career. We have reliably served members like you for over 40 years, and we're proud to say we're Canada's largest defined contribution pension plan.
Flexible payments on your schedule
The VPB is flexible for your financial needs. You set the payment amount and schedule, with the option to alter both if your financial situation changes.
Lump-sum withdrawals
You can't always predict financial emergencies. The VPB allows you to make lump-sum withdrawals to support unexpected expenses in retirement.
Estate option
Your beneficiary(ies) or estate receive your VPB account balance in case of your death.
Combination of Variable Pension and Lifetime Pension
Customize your retirement income streams with a combination of lifetime pension and variable pension income.
Longevity risk
Canadians are living longer than prior generations. Your VPB account balance is not guaranteed for life. If longevity and running out of funds are a concern, you can use your VPB account to purchase a PEPP Lifetime Pension that provides a dependable, monthly income for your lifetime.
Account balance management
The VPB does not guarantee investment returns, income levels, or how long your money lasts. You must make financial decisions that support your preferred lifestyle and available VPB account balance.
Who Might Consider the Variable Pension Benefit (VPB)?
The VPB might be suitable for individuals who:
- are comfortable budgeting income to expenses.
- prefer a hands-on approach to investments and payment decisions.
- have enough funds to comfortably cover their expected retirement lifestyle.
- want to leave an estate after death.
- need retirement funds available for unexpected expenses.
- are not concerned about inflation.
- want flexible payments compared to or to compliment the pre-determined dependability of PEPP's Lifetime Pension.
As with any retirement income strategy, it's important for you to carefully consider your own financial situation, risk tolerance, and retirement goals. Consult with one of our Retirement Information Consultants to determine if the Variable Pension is appropriate for you.