Government Pensions
Roughly 16% of all Canadians will be 65 or older by the year 2016 and may be entitled to receive one or more of these government pensions:
- Canada/Quebec Pension Plan (CPP/QPP)
- Old Age Security (OAS)
- other government pensions
Government pensions are not automatic. You must apply in advance to receive most pensions - generally about six months before you're eligible to receive benefits.
Don't short-change yourself. Know exactly how much you're entitled to receive from government sources before you retire.
Your accountant, the Income Security Programs department of Human Resources Development Canada and/or your provincial social services department can help you determine your eligibility and benefits.
Canada/Quebec Pension Plan (CPP/QPP)
If you worked and contributed to either the Canada Pension Plan or the Quebec Pension Plan, you are entitled to receive pension benefits under these plans. Full details are available on the Human Resources Development Canada Web site.
Benefits
The actual amount of your benefit is based on the number of years you contributed and on your pensionable earnings during that period.
Benefits generally amount to 25% of your average annual job earnings over your lifetime, up to an annual maximum. Income is paid monthly and indexed to inflation annually.
The maximum CPP/QPP payment for 2001 is $775 per month - or just over $9,000 per year.
Timing
You are entitled to collect your pension at age 65. Depending on your personal situation, you may apply for reduced benefits as early as age 60, or receive higher monthly benefits by delaying payments until age 70. For each month before (or after) age 65, the CPP benefit decreases (increases) by ½%. For example, if the CPP benefit starts at age 60, the maximum benefit will be reduced by 30% (1/2% x 60 months).
It's generally recommended that you not begin drawing your CPP/QPP pension until you need it. If you do, you'll pay income tax on the additional income and reduce your benefit for later years when you may need it more.
Old Age Security (OAS)
Old Age Security is a basic benefit paid monthly to all Canadians age 65 or older who meet Canadian residency requirements - regardless of whether they have ever worked.
In 2000, the maximum OAS benefit is approximately $422 per month.
"Clawback Provision"
OAS benefits are subject to a "clawback provision" which requires high-income pensioners to repay all, or a portion of their OAS benefits.
Under this clawback provision, individuals with annual net income of approximately $54,000 must begin repaying their OAS benefits. OAS benefits disappear completely for those with annual net income of roughly $87,000 or more.
Other Pensions and Supplements
Low-income pensioners may be eligible for other pensions and supplements offered through the federal government including:
- Guaranteed Income Supplement (GIS)
- Spouse's Allowance
- Widowed Spouse's Allowance
In certain circumstances, some pensioners may also be eligible for provincial income supplements to subsidize their Old Age pension and GIS. Health and Welfare Canada or your provincial social services department can provide full details.
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