Calculating the Pension
Calculation of the Pension from the General Account
Calculation of the Pension from the Complementary Account
Employees accumulated pension benefits in this account for hours worked before 2005.
The General Account is a “defined benefits” account. This means that the pension received by the employee may be determined in advance using a specific calculation method defined in the Règlement sur les régimes complémentaires d’avantages sociaux dans l’industrie de la construction.
Thus, in the construction industry, the pension from the General Account accumulated by employees is calculated on the basis of their adjusted hours worked (see Adjusted Hours section below) during each year and the applicable annual pension rate. The pension rate may vary from year to year.
|Simplified example – calculation of pension from the General Account accumulated before 2005
|Hours worked in||Annual pension rate per 1,000 adjusted hours worked||Employee’s number of adjusted hours worked||Calculation for each year during which the employee worked||Accumulated pension|
|1989||$496.84||1 000||1000 x $496.84 / 1000||$496.84|
|1990||$477.72||500||500 x $477.72 / 1000||$238.86|
|1991||$447.57||2 000||2 000 x $447.57 / 1000||$895.14|
|1992||$426.26||1 500||1 500 x $426.26 / 1000||$639.39|
|Annual pension from the General Account payable upon retirement||$2,270.23|
The annual Pension Statement shows the value of the employee’s pension benefit in the General Account.
Hours worked for the pension plan are considered to be:
- The hours forwarded by employers, for which the appropriate contributions have been paid to the CCQ;
- Hours credited to the employee for work done outside Québec under a reciprocal transfer agreement, where amounts have been transferred to the CCQ;
- Hours credited for certain individuals who have already participated in the pension plan as employees and who might, under certain conditions, voluntarily continue to do so (for example, company officers).
Since 2005, hours worked have continued to accumulate in employees’ files, since they are used to determine the age at which an employee may apply for retirement.
Adjusted hours are used to calculate the pension from the General Account. Before 2005, the hours were adjusted to take account of the amount of the contributions paid into the pension plan. For example, from August 1982 to October 1985, the Québec government’s Corvée-Habitation program to boost residential construction was financed in part by contributions from industry employees. Part of the contributions were paid into this program, and the total amount paid into the pension plan was reduced by the same amount. The number of adjusted hours was thus lower than was the number of hours worked during this period.
Since no new pension amounts have accumulated in the General Account since 2005, the number of adjusted hours has stopped increasing. This means that for many employees, it is normal that the difference between the total adjusted hours and the total hours worked will continue to increase.
When an employee has received a partial refund under the provisions of the Regulation in effect before 1997, adjusted hours paid are recorded in his or her file. They reduce the amount of the pension in the General Account in proportion to the refund received.
The pension supplement from the General Account
A supplement of 12.5% is added to the pension from the General Account at the time of retirement and is part of the pension payable to employees.
|Example of calculation – supplement from the General Account|
|Annual pension from the General Account for an employee||$20,000|
|Annual pension payable||$22,500|
The Complementary Account is a “defined contribution” account. This means that the amount of the contributions paid in for each hour worked is predetermined by the pension plan but the amount of the pension is not known until retirement. For the construction industry, the contributions are determined by the union and employer associations as part of the collective agreements governing the four sectors. The amount of the pension depends mainly on the value of the Complementary Account and the age of the employee when he or she applies for retirement.
The value of the Complementary Account
The value of an employee’s Complementary Account is composed of the accumulated employer and employee contributions plus interest earned.
The more the employee works, the more the contributions accumulate in the employee's account and the more the capital for the pension increases. The interest earned on the pension fund investments is credited every month. The higher the returns, the higher the value of the account and the higher the resulting pension. However, when investments generate negative returns, the value of the account and the pensions it funds may decrease.
The importance of age when applying for retirement
When an employee retires, the amount that that employee has accumulated in the Complementary Account must be paid out in the form of a monthly lifetime pension. The monthly pension is calculated based on the employee’s age at the time of the application. Thus, the younger the employee, the greater the number of payments during his or her lifetime. Conversely, if the employee is older, the number of payments should be lower. For example, an employee who is 55 should receive more payments than an employee who is 60 at the time of application.
Simplified example: calculation of pension from the Complementary Account
- An employee age 55 has accumulated $150,000 in his Complementary Account when he applies for retirement. Depending on the assumptions used at that time, his pension could be, for example, $10,000 per year.
- Another employee, age 60 , who has also accumulated $150,000 in his Complementary Account and who applies for retirement at the same time, could receive an annual pension of $12,500.