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Government Retirement Programs

This guide provides an overview of Canada's major government retirement programs, including the Canada Pension Plan (CPP), Old Age Security (OAS), and the Guaranteed Income Supplement (GIS). Established in 1966, CPP mandates contributions from those aged 18 to 65, with benefits available at retirement age of 65. Learn about contribution rates, dropout provisions, and the impact of income on OAS benefits. This resource also highlights eligibility criteria and application procedures for GIS and OAS, helping you navigate the complexities of retirement planning.

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Government Retirement Programs

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  1. Government Retirement Programs Presented By: Ben Reale, CFP

  2. Canada Pension Plan (CPP) • Established in 1966 • In 1999, $22B in contributions were made to the CPP • Mandatory contributions are made by those aged 18 to 65; optional for those aged 65 to 70 • Indexed annually in January • ‘Normal’ retirement is age 65 • Both employee and employer each contribute 4.95% on income between $3,500 and $50,100 (YMPE) • $2,306.70 max employee portion contribution • Self employed contributes 9.9% or $4,613.40

  3. CPP benefits

  4. CPP sharing • Aim is to reduce total tax paid but look out for OAS claw-back and other tax credits that may be affected • Both must be 60 or older • Can split up to the number of years living together while contributing to CPP • Total benefits paid don’t change and upon death the full amount reverts back to the originator

  5. Statement of contributions • It is important to obtain a copy of your statement • Ensure all contributions are correct • Apply the proper dropout provisions • Call 1-800-277-9914 • Visit www.sdc.gc.ca • Navigate to Explore our site > Programs and policies > CPP > CPP statement of contributions online

  6. Dropout provisions • Any years you were on CPP disability • Any years you left or reduced work to care for a child under the age of 7 • You must apply for this provision • 16% of your lowest earning years (up to 7.5)

  7. CPP has changed • Changes to be phased in from 2012 to 2016 • If you wait until after age 65 to take CPP, it will increase by a larger percentage than before • If you take the CPP before age 65 it will decrease by a larger percentage than before • If you are under 65, receiving CPP and still working, you and your employer will be required to make contributions • If you are between 65 and 70 and receiving CPP and still working, making contributions for a higher pension will be optional

  8. CPP has changed • The dropout provision for low income earning years will increase • You will be able to begin receiving your CPP without having to stop work • In the future visit www.servicecanada.gc.ca and search for the CPP calculator • Currently it is being updated to reflect the new upcoming Post Retirement Benefits

  9. Current vs. new rules

  10. When should you start? • Depends on your life expectancy • Evaluate your retirement income needs and where that income will come from • Government programs, employer plans, Tax Free Savings Accounts, Registered Retirement Savings Programs, other personal assets • If there is a gap, can and should CPP fill it? • Remember any reduction for taking it early or increase for taking it later is permanent • The Post Retirement Benefit is interesting, consider taking CPP early and then continuing contributions while working • If you stop working, start collecting CPP

  11. OAS eligibility Scenario #1 – people living in Canada • You are 65 years of age or older • You live in, are a legal resident of, or be a citizen of Canada when your application is approved • You must have lived in Canada for at least 10 years after turning 18

  12. OAS eligibility Scenario #2 – people living outside Canada • You are 65 years of age or older • You were a Canadian citizen or legal resident the day before you left Canada • You must have lived in Canada for at least 20 years after turning 18

  13. GIS eligibility • Guaranteed Income Supplement • Designed to assist low income seniors already receiving OAS • Income tested program • Net income includes all sources of income except OAS, GIS and allowance

  14. The Allowance • A monthly benefit for low income seniors aged between 60 and 64 • Spouse or common-law partner must be eligible or currently receiving OAS and the GIS • It must be applied for either online through www.servicecanada.gc.ca or by calling 1-800-277-9914 • Must be reported on your tax return but it is NOT taxable

  15. OAS, GIS & Allowance benefits

  16. More benefits information • OAS has a claw-back that reduces your payment based on your net income • Claw-back starts eroding OAS at $69,562 and completely eliminates it at $112,772 • About 5% of seniors have some OAS clawed back & less than 2% have it completely taken • For an exact benefits calculation visit www.servicecanada.gc.ca • Home > OAS (under Seniors) > What are the payment rates? (under Financial Information) > Tables of rates (under Related information)

  17. International benefits • Canada does have social security agreements with many other countries • If you’ve contributed to a social security system in a partner country you may be eligible for benefits in Canada • For more information visit www.servicecanada.gc.ca and click on HOME > Seniors > International benefits OR call 1-800-454-8731

  18. Will you have enough? • Estimate your expenses in retirement • Estimate your income in retirement from all sources • Will you have enough? • STEW! • Save more • Take less • Earn more • Work longer

  19. Questions & Answers Thank you! Presented By: Ben Reale, CFP

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