The commuted value is an estimation of how much money a person would need to have in a lump sum now to provide the DB pension income in the future. The calculation takes into account factors such as age; and an assumed rate of return. The rate of return is based on bond rates. If the assumed rate of return is low, a higher lump sum amount is needed.I am in the same boat as Retire Hopefull. I can retire in OCt. 09 with a full DB pension and am considering taking the commuted value of my pension. Someone mentioned that bond yields are low, can someone explain how bond yields effect the commuted value amount ?? Are commuted values higher now because the bond yields are low ? Does the inflation rate effect the cv amount ? I can leave my company anytime and take the cv and am trying to figure out if I should do it now or wait until October. Will it make any difference ?
Did someone tell you that you will receive a PAR? If your pension commuted value (CV) is high enough that you exceed the CRA limits for a tax free transfer you will not be receiving a PAR. To test it yourself divide the commuted value by your accrued annual pension. If the result is greater than 9 (which it should be if you are close to normal retirement age) there will not be a PAR. You should confirm this with your pension administrator. Also note that PARs are not calculated until the actual CV payout is made.