Purchased Service


DEFINITION of 'Purchased Service'

The additional amount of service years that Canadian pensioners can purchase to go towards their pension account. Pensioners may purchase additional service time to cover service absences for reasons such as authorized leave without pay (including maternity or paternity leave), military service and long-term disability waiting period.

BREAKING DOWN 'Purchased Service'

Pensioners may make up for lost contributions to pension plans in the event that they spent a period of time working in a service for which they were not eligible to receive pension benefits. Often, the cost of the purchased service is equal to the required employee contributions for the period of service being purchased; in some cases, the costs are higher.

Purchases of service can occur as a lump sum payment - by check, money order, or the direct transfer of funds from a Registered Retirement Savings Plan or other registered savings plan, or through payroll deductions, which would occur in addition to any regular pension contributions.

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