Did you know that you’ve already started building your retirement income? By living and working in Canada, you participate
in one of the best public pension systems in the world.
CANADA’S RETIREMENT INCOME SYSTEM HAS THREE LEVELS:
1. Old Age Security (OAS) provides the first level, or foundation. If you meet certain
residence requirements, you’ll be entitled to a modest monthly pension once you reach the age of 65.
2. The Canada Pension Plan (CPP) is the second level of the system. It provides you with
a monthly retirement pension as early as 60, if you have paid into it. The Canada Pension Plan also offers disability,
survivor and death benefits. Quebec has a similar plan, called the Quebec Pension Plan.
3. The third level of the retirement income system consists of private pensions and savings.
The first and second levels of Canada’s retirement income system make up Canada’s public pension system. Today, these
pensions form a significant part of the income of Canada’s seniors. But public pensions are not intended to meet all
your financial needs in retirement. Rather, they provide a modest base for you to build upon with additional, private
Many employers help you build your retirement income by providing pension plans.
But perhaps you are self-employed or have no employer plan. Maybe you want to supplement your pension income. You can
build your own nest egg through Registered Retirement Savings Plans (RRSPs). Or you can earmark for retirement other
investments such as mutual funds or the equity in your home.
The Government of Canada provides tax assistance on savings in Registered Pension Plans (RPPs) and RRSPs, which
encourages and assists saving for retirement.
Many financial planners say that you will need about 70 percent of your current (pre-tax) earnings to maintain your
standard of living in retirement. For example, if you earn $60,000 now, you might aim for $ 42,000 of income in
retirement. However, this is only a general rule. You’ll need to look at your own circumstances to decide what level
of income is right for you.
OLD AGE SECURITY
The Old Age Security (OAS) program is the cornerstone of Canada’s retirement income system.
It includes a basic pension that goes to almost all people 65 or older who have lived in Canada for a certain time.
Old Age Security is Canada’s largest public pension program. It provides a modest monthly pension to most people,
starting at the age of 65.
The Guaranteed Income Supplement (GIS) is an additional monthly benefit for low-income
The Allowance provides a monthly benefit to low-income people between the ages of 60 and 64.
It is available to the spouses or common-law partners of OAS pensioners and survivors to help bridge the gap until they
become entitled to receive OAS at 65.
The Government of Canada pays OAS benefits from general tax revenues.
You qualify by living in Canada
Generally, you must be 65 and a resident of Canada for at least 10 years after your 18th birthday to receive
OAS in Canada.
Canadians, currently under the age of 54, will now only be able to retire at a later age, not the regular 65. Anyone born prior to April 1st, 1958 (everyone 54 or older as of March 31st, 2012), will be eligible to receive OAS at the age of 65 as usual. Anyone born in year 1963 or later will be eligible for OAS at the age of 67. Anyone with a birth day in between the two years will be eligible a month later for every two month of later birth day (see the table).
If you wish to receive the basic OAS pension outside Canada, you must have lived here for at least 20 years after
your 18 birthday. The Guaranteed Income Supplement and the Allowance are only for seniors who live in Canada. They
stop if you leave Canada for more than six months. If you return to Canada you must reapply.
How much income to expect
The amount of OAS you receive depends on the number of years you live in Canada after you turn 18. Generally, you
receive a full pension if you live in Canada for at least 40 years after 18. If you live here for less time, you may
qualify for a partial pension. With a partial pension, you’ll receive 1/40th of the full pension for each complete
year you live in Canada after you turn 18.
SUMMARY OF OAS RATES AND BENEFITS
|Maximum OAS, GIS and SPA Benefit Rates for
2012 (â äîëëàðàõ)
|Old Age Security (OAS) Maximum benefits
|Guaranteed Income Supplement (GIS) Maximum
|Spouse’s Allowance (SPA) (äëÿ ïåíñèîíåðîâ â âîçðàñòå îò 60
äî 64 ëåò)
||Maximum benefit, ñóïðóãà/ñóïðóã
|Maximum benefit, âäîâà/âäîâåö
For latest update, please, click here.
In 2012, a full OAS pension is about $544.98 per month.
If you have little or no income other than the OAS pension when you retire, you may be eligible for the Guaranteed
Income Supplement. The amount you receive depends on your income or your joint income if you have a spouse or
common-law partner. The GIS is added to your monthly OAS pension.
OAS is taxable, GIS and the Allowance are not.
If your net individual income is above a set threshold, your OAS pension will be reduced. This threshold
($64,718 in 2008) is adjusted each year for inflation. Only about five percent of seniors receive reduced OAS
pensions, and only two percent lose the entire amount.
If you receive the basic OAS pension while living outside Canada, it is paid in Canadian dollars and you receive
a tax slip to report it in your country of residence. Your pension may also be subject
to Canadian income tax.
OAS pensions, the GIS and the Allowance are adjusted for inflation every January, April, July and October.
Keep your records to prove the time you live in Canada.
If you live outside the country for a period of time, keep records of your travels (such as passports and airline
tickets) to show when you left and when you returned to Canada. This will help prove your eligibility for the OAS
IT’S NOT AUTOMATIC - You should apply for your Old Age Security pension six months before you turn 65. To receive
the Guaranteed Income Supplement and the Allowance, you must also apply for them, and then renew them every year.
This is usually done by filing an income tax return before April 30.
CANADA PENSION PLAN
The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) can provide you with
a monthly retirement pension and other benefits.
The Canada Pension Plan pays a monthly retirement pension to people who have worked and contributed to the CPP.
The CPP also acts as an insurance plan, providing disability and survivor benefits for those who qualify. It provides
a monthly income to you and your dependent children if you become severely disabled during your working years. It also
provides a monthly income to your surviving spouse or common-law partner and dependent children if you die. A lump-sum
death benefit is available to your estate when you die.
Your CPP contributions are based on earnings between a minimum and maximum amount, as measured by statistics Canada.
For example, in 2008, you pay contributions only on earnings between $3,500 and $42,100.
Helga earned a total of $27,000 in 2012. Her contributory earnings are therefore $23,500, calculated as
($27,000 - $3,500). Helmut earned a total of $62,000 in 2012. His earnings are above the maximum $50,100, so his
contributory earnings are $46,600, calculated as the lesser of $62,000 and $50,100 minus $3,500.
In 2012, the employee’s contribution rate was set at 4.95% of pensionable earnings. Self-employed individuals contribute
both the employer and employee’s shares, or 9.9% of pensionable earnings in 2012. But the self-employed will get the tax
credit for the portion, that he paid for employer.
In 2008, Joe, who is self-employed, earned $52,500. This amount is above the maximum. His contributory earnings
are $38,600, calculated as ($42,100 - $3,500). His CPP contribution for the year is $3,821.40, calculated as
($38,600 x 9.9%). Eleanor earned $22,500 in 2008 from her employer. Her contributory earnings are $19,000,
calculated as ($22,500 - $3,500). Her CPP contribution is $940.50, calculated as ($19,000 x 4.95%). Her employer
also contributes $940.50.
SUMMARY OF CPP RATES AND BENEFITS
|Contributions (in dollars)
|Yearly maximum pensionable earnings
|Employer contribution rate
|Employee contribution rate
|Maximum employee contribution
|Maximum self-employeed contribution
|Maximum benefits (in dollars)
|Retirement pension, age 65
|Maximum disability pension
||for disabled contributor
|for dependent child
||surviving spouse, age 65 or over
|surviving spouse, under 65 and raising a dependent
child or disabled
|dependent child (orphans benefit)
For latest update, please, click here.
Your employer deducts your contributions from your pay and makes an equal contribution. If you are self-employed,
you act as both employee and employer and pay both portions.
The Canada Customs and Revenue Agency (CCRA) collects contributions on behalf of CPP.
CPP funds are kept separate from general tax revenues. They are used only to pay benefits, cover administrative
costs and make investments.
You qualify by working in Canada
Generally, all workers in Canada over the age of 18 pay into the CPP (or the QPP) and qualify for benefits.
How much income to expect
In general, your retirement pension replaces about 25 percent of the earnings on which you paid into the CPP. The exact
amount depends on how much and for how long you contribute. The age at which you decide to take your pension also
affects the amount you receive each month.
In 2012, the maximum CPP retirement pension is $987.67 per month if taken at the age of 65.
CPP coverage offers some flexibility
Over the course of your career and if you raise a family, there may be years when you have low or even no earnings.
This would normally reduce your CPP benefits because of the lower contributions you make during those years. However,
CPP excludes 15 percent of your lowest earning years when calculating your retirement pension. Time spent away from
work while you raise children under the age of seven can also be "dropped out" of the calculation, these provisions
ensure that your future pension is not reduced because of a few low-earning years.
The age you start your pension makes a difference… forever
The normal age that you start receiving a CPP retirement pension is 65. However, you can start receiving your pension
as early as 60 or as late as 70. If you start your pension before 65, you must stop working or earn less than a maximum
amount for a required period of time. If you start your pension early, it is permanently reduced by 0.5 percent for
each month that you are under 65. If you start your pension later, it is increased by 0.5 percent for each month
that you re over 65, up to the age of 70.
CPP retirement pensions are protected from inflation
CPP monthly retirement pensions are adjusted for inflation every January to keep up with increases in the cost of living.
CPP retirement pensions are taxable
You and your spouse or common-law partner can share your CPP retirement pensions equally if you are at least 60 years
old and have both applied for retirement pensions. This may result in income tax savings. You must apply to have your
Plan for your retirement - use your personal Statement of Contributions
Each year, we provide a personal "Statement of Contributions" to all CPP contributors. If you are 30 or over, your
statement estimates the retirement pension you can expect from the CPP. It also estimates the benefits you and your
dependants could receive if you became disabled or died. Your statement is a very useful financial planning tool.
Verify your Statement of Contributions
Your statement gives a detailed history of your earnings and of your contributions to both the Canada Pension Plan
and Quebec Pension Plan (if you worked in Quebec). You should make sure your statement is accurate. You may find it
helpful to compare the employment income and CPP contributions you reported on your annual income tax returns with
the earnings and contributions recorded on your statement.
IT’S NOT AUTOMATIC - You should apply for your CPP retirement pension at least 6-11 months before you want it to start.
You can obtain an application by internet or by phone.
Have you lived or worked outside Canada?
Canada has agreements with many countries that can help you to get social security benefits from either country.
If you did not live or work long enough in one country to qualify for benefits there, the time your spent in that
country may still be considered when determining your eligibility to receive benefits from either country. To find
out if a country has an agreement with Canada, visit web site or call toll-free number (useful links).
Information about the third level of the retirement income system that consists from group and private pensions you
can read in section "Questions and Answers" (Employer Pensions Plans).
I Canada's Retirement Income System
I Employer Pension Plans
I RRSP Loan