Calculation of the Pension from the Complementary Account

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.