Eligible workers can apply to retire with immediate pension based on years of service, with no reduction for retiring early
The federal government has opened up applications for a time‑limited Early Retirement Incentive aimed at managing workforce reductions in the public service primarily through voluntary departures rather than layoffs.
The measure is part of Budget 2025’s Comprehensive Expenditure Review, which is intended to modernise government, improve efficiencies and deliver better results and services for Canadians, the Treasury Board of Canada Secretariat noted in a statement.
“Workforce reductions will be managed to the greatest extent possible through attrition and voluntary departures,” said Shafqat Ali, president of the Treasury Board, citng the emphasis on voluntary, structured options "to retire early with clarity and predictability.”
Budget 2025 marks a significant shift in the federal government’s approach to public sector management, with plans to reduce the size of the federal public service by about 40,000 positions — or 10% — by 2028-29.
Terms of the early retirement offer
Under the Early Retirement Incentive, eligible federal public servants can apply to retire with an immediate pension based on their years of service, with no reduction for retiring early.
Normally, when an employee retires before meeting the age and service requirements for an immediate annuity, their pension is permanently reduced by 5% for each year they retire early. For example, an employee who retires five years early would normally see their pension reduced by 25%.
The application period for the Early Retirement Incentive is now open and will run until 24 July 2026, the Treasury Board of Canada Secretariat said. Eligible employees will receive a letter with instructions on how to apply.
The federal government has forecast the program will cost $1.5 billion over five years, with about half of that amount expected in 2026, CBC previously reported.
PSAC complains about process
Recently, the Public Service Alliance of Canada (PSAC) filed a formal complaint against the federal government’s early retirement program, alleging that Ottawa is bypassing negotiated processes and undermining the union’s role as bargaining agent.
In complaints filed with the Federal Public Sector Labour Relations and Employment Board and reported by CBC/Radio‑Canada, PSAC is asking the government to “cease the unilateral implementation” of the program until its terms are negotiated with the union. The board is an independent tribunal that handles disputes over collective bargaining and alleged unfair labour practices.
According to the report, roughly 68,000 civil servants over the age of 50 were invited late last year to check their eligibility for the incentive.
By December 2025, Ottawa was in the process of sending information about the voluntary early retirement program to nearly 70,000 employees, according to the report.
Retirement preparedness in Canada
Nearly half of Canadian workers are behind on retirement savings, yet the average Canadian still leaves the workforce at 59, according to a previous report.
Meanwhile, a separate study found that 48% of non-retired Canadians have a workplace pension plan, whether defined benefit (DB) or defined contribution (DC). A quarter of those with an employer pension do not know whether their plan is DB or DC. Only 33% of non-retired Canadians have a retirement plan and savings, and just 11% know how much annual income they will need in retirement.
Canadian workers are routinely undervaluing their workplace retirement plans because of how employers and plan sponsors communicate them — and that this is happening despite retirees saying they “couldn’t live without” that income, according to another report.
Canadians now believe they need an average of $1.7 million to retire comfortably, but more than one‑third doubt they will reach that goal, according to a recent report — suggesting employers can do a lot more to help employees save.
