Government entitlements

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There are 2 main types of government pensions that most Canadians can expect to receive during their retirement years:  Old Age Security (OAS) and the Canada Pension Plan (CPP).  Guaranteed Income Supplement (GIS) is the other main OAS benefit for low-income seniors. Both OAS and CPP benefits are indexed to inflation as measured by the year over year change in the Consumer Price Index (CPI).

Canada Pension Plan

CPP benefits are based upon your contributions over time and are not affected by other income you may receive.

CPP benefit payments are based on contributions made to the plan during a person's working years. You can contact Service Canada for an updated CPP statement of contributions. Today, the maximum CPP retirement pension amount is $986.67/month at age 65. CPP can be taken as early as age 60 or delayed until age 70, but prior to age 65, CPP payments can begin only if you are substantially retired. The percentage amounts used to reduce it if taken before age 65 will be gradually increased from 0.52 per cent in 2012 to 0.60 per cent in 2016.

For a person who begins collecting the CPP retirement pension at age 60 after 2015, the pension would be reduced by 36 per cent (60 months multiplied by 0.60 per cent). The percentage amounts used to increase the pensions taken after age 65 will be gradually increased from 0.57 per cent in 2011 to 0.70 per cent in 2013.

Thus, for a person who begins collecting CPP at age 70 after 2012, the pension would be increased by 42 percent (60 months multiplied by 0.70 per cent).

In addition, CPP benefits can be split with your spouse once you are both 60 or older, helping to split your total family income more effectively. For example, if you are receiving $800 per month and your spouse is receiving $100 per month, together you can split the CPP benefits so that you would both receive $450 per month (800 +100 = 900/2 = $450 each).

Old Age Security 

The Old Age Security (OAS) program is the foundation of Canada's retirement income system and provides you with a modest pension at age 65.  To receive the maximum OAS pension, you must have resided in Canada for periods totaling 40 years after reaching the age of 18.  Unlike CPP, OAS is an income-tested benefit.  OAS payments cannot be split with your spouse. 

The maximum OAS pension is $540.12/month. You are eligible to receive OAS payments if you are 65 or older, a Canadian citizen or legal resident at the time your OAS application is approved and must have lived in Canada for at least 10 years after turning 18. For every dollar your annual income exceeds $69, 652, you will have to repay 15 per cent of that excess amount. If your income is $112,772 or greater, your entire OAS benefit will be clawed back.

A list of OAS payment rates and clawback rates is available on the Service Canada website.

Guaranteed Income Supplement

Guaranteed Income Supplement (GIS) is the other main OAS benefit for low-income seniors. If you are over 65 and your income excluding OAS is less than $16,368, you should apply for the GIS benefit. Both CPP and OAS are indexed to inflation. You should apply for CPP and OAS six months before you want the benefits to start. If you are not covered by either of the above scenarios, you may still qualify for a pension since Canada has social security agreements with many countries. If you have lived in one of these countries or contributed to its social security system, you may qualify for a pension from that country, from Canada or from both countries.


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