Calculating the lump sum value of Canadian pensions will become more complex when new actuarial standards take effect on February 1. To address this challenge, Mellon Financial Corp. has developed a new calculator that is the first to meet these new standards.

It is available free on the Internet until March 1.

CV Calculator is available through Mellon’s Human Resources & Investor Solutions (HR&IS) Canadian business. It is designed to generate commuted value factors under defined benefit pension plans based on the revised Standard of Practice for Determining Pension Commuted Values developed by the Canadian Institute of Actuaries (CIA). These factors are used in the calculation of the equivalent lump-sum value of a pension in lieu of a deferred or immediate life annuity for a terminating plan member.

With the implementation of the new CIA Standard of Practice on February 1, 2005, the annuity factors on which commuted values are based will change for most Canadian pension plans. The calculation of these factors will be more complex because the two interest rates used for the determination of the annuity factors will both be variable. Under the current Standard, use of a variable and a fixed interest rate allows pension administrators to refer to a small number of tables of annuity factors in the calculation of commuted values.

“People need to make informed decisions about their future, but the new Standard makes commuted values more of a challenge to both calculate and communicate,” said Scott Simpson, Mellon HR&IS national practice leader, retirement. “That’s why we’re making this new tool available to everyone for the next two months.”

According to Mellon, the calculator simplifies the determination of these annuity factors, and eliminates the need for hundreds of reference tables.

It can calculate annuity factors based on either the 1993 or 2005 CIA Standard of Practice (allowing comparison and ensuring validity in provinces that have not yet adopted the 2005 Standard) for most forms of pension payments. It has the flexibility to determine commuted values of pensions payable at a deferred age or payable immediately. Finally, it allows the user to control variables such as the member’s age and gender, the spouse’s age and gender, and the age at which pension payments begin for deferred annuities.

The calculator is available at no charge on a trial basis until February 28 at www.mellon.com/hris/canada/cvcalculator/.

As of March 1, it will be available on a subscription basis only.

CV calculator
http://www.mellon.com/hris/canada/cvcalculator/