Payment of surcharge debt

Learn about surcharge debt payment from:

Payment from your productivity benefit

Any surcharge debt remaining when your benefit becomes payable will normally be paid from your productivity lump sum benefit. However, you can request for it to be recovered from your DFRDB scheme benefit. If your productivity benefit is not enough to cover the full debt amount, the balance will be paid through a reduction in your retirement pay.

Payment from your pension

To pay an outstanding surcharge debt from your DFRDB pension, your debt must be converted to an annual pension reduction amount; your pension will then be reduced by that amount.

Your pension will be permanently reduced; it will not increase if it goes beyond the period of your surcharge reduction factor. An annual pension reduction is determined by dividing the amount in the surcharge debt account by a DFRDB scheme pension surcharge reduction factor. Your reduced pension will be subject to an indexation adjustment in the normal manner on the first pension payday in each January and July.

Payment from a commutation

If you elect to commute some or all of your retirement pay to a lump sum amount, the following provisions will apply:

  • If you elect to apply the surcharge deduction amount to your DFRDB scheme benefit not your productivity benefit, the lump sum paid to you will be reduced by your surcharge debt amount.
  • If you do not do that, your surcharge debt will be recovered from your productivity lump sum benefit; however, if it is not enough to cover the full amount, the excess amount will be received from your post-commutation rate of retirement pay.

Your surcharge debt will be paid from a before-tax amount because the amount used to pay the debt does not form part of taxable income and is not subject to tax otherwise applied to your pension or lump sum.