Page 4 The Retirees' Newsletter

The Faculty and Librarian Retirees' Association, University of Windsor, Windsor, Canada

Vol VII, Issue No.2 -- April, 1997

THE ABCs OF THE UNIVERSITY OF WINDSOR PENSION PLANFOR FACULTY AND CERTAIN OTHER EMPLOYEES

(The following is an excerpt from a GUIDE being Prepared by Norman Shklov, our Founding President, explaining how our Pension Plan works, in principle and in practice. Further excerpts will be published in future issues of The Newsletter)

HOW MUCH IS MY PENSION? HOW IS IT CALCULATED?

WHEN YOU STARTED WORKING FOR THE UNIVERSITY OF WINDSOR, approximately 6% of your monthly salary was deducted from each paycheque. Most* of this was deposited, in your name, in a fund called the University of Windsor Pension Fund. The University of Windsor also contributed, in your name, a similar sum to this fund.

IN THE SUBSEQUENT MONTHS, deposits consisting of the sums deducted from your paycheques and those made by the University in your name, continued to be made in this fund. As these deposits were made, they, as part of the Fund, were invested. The earnings of these investments were credited to you and, at the end of each fiscal year, were added to the accumulated amount of the deposits in your name.

THIS CONTINUED, year after year, until you retired. When you retired, there was in your name, a sum of money consisting of your payments (the deductions from your paycheques just described), plus the University's deposits in your name, plus the money earned by the investments over the years. This sum, in your name, was part of the U. of W. Pension Fund.

At this time ­ that is, at the time of your retirement ­ in order to determine the amount of your actual pension, two calculations were made. They were as follows:

Calculation 1: The monthly life pension which could be purchased by the accumulated sum in your name was determined. This pension is called the "Money Purchase Pension".

Calculation 2: This calculation is made by using an agreed-upon formula, which is as follows: 2% times your number of years of service, times your average monthly salary over the 48 months of highest salary. The result is called the "Minimum Guaranteed Pension". We can visualize these calculations by putting them on a graph:

One might think that Calculation 1 ­ the Money Purchase Pension ­ would be the amount you would receive as your actual pension, since that is the pension that can be bought with the amount that is in the Fund in your name. However, that is not necessarily the case.

The Pension Plan has been set up so that the pension you actually receive will never be less than Calculation 2 , that is, never less than your Minimum Guaranteed Pension (very appropriately named!). Hence, if 1 is less than 2, you will receive pension amount 2, the "Minimum Guaranteed Pension". If, however, amount 1 is greater than amount 2, you will receive amount 1. In short, your pension will always be whatever is the greater of these two amounts.
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