October 14, 2009
For some OMERS members, the deciding factor in whether to buy back service was the option of paying in monthly instalments, rather than one lump sum.
OMERS started the monthly payment option for buy-backs in May 2009, and members say it’s easier to work into the household budget.
“It’s way more manageable from a money point-of-view,” says Joe Sellors, Supervisor, City of Toronto, Department of Special Events. “If you’re saving for the future, and putting money away in smaller amounts, it’s easier than through a lump sum, especially with a young family.”
OMERS contacted members who were in the process of a buy-back, to offer them the new monthly payment option. Joe was, in fact, the first member to opt for the monthly plan.
“It took a little bit of time to get to it, to read the [info] package, but I’m glad I did,” Joe says.
Anne-Marie Nickason, a Resource Teacher at a City of Hamilton daycare centre, says the monthly payment option – and a thumbs-up from her financial adviser – sealed the buy-back deal for her.
“I talked to my financial adviser,” Anne-Marie says. “I have no clue about things like that. He looked at [the info package] and he said it was a good thing to do. He said, ‘Yes. Do it.’”
Members requesting buy-back estimates are often surprised at the cost. While it is an investment in the future, paying for it in one lump sum can be difficult. The monthly payment option separates it into smaller pieces.
“You get an estimate with this huge amount and it’s scary,” Anne-Marie says. She was looking into buying back a maternity leave. “A big amount of money can go somewhere else. I can decide if I need to do this to the house, or pay for a buy-back. But $120 a month I can do.”
About buying back service
OMERS pensions are based on a formula using earnings and years of service. A member may be able to buy back service periods – for example, a leave period that was not previously purchased. Buying back service increases a member’s credited service in the Plan, and increases the amount of pension.
The member’s overall cost will be higher under the monthly payment plan than if the payment was made in one lump sum, due to the interest charge. The additional service is credited as the monthly payments are received.
Buy-back payment options include:
- Monthly pre-authorized withdrawals over 12, 24, or 36 months, with an option for renewal based on a new costing; or
- Lump sum (by cheque, RRSP transfer, etc.); or
- A combination of a lump sum and monthly payments.
For more about buying back service, see the Member Handbook.
Information about the monthly payment plan
