Retirement and Pensions in Canada
Getting a Retirement Pension in Canada
Canadian residents have the following options when it comes to financing retirement.
A) Canada Pension Plan (CPP)
The Canada Pension Plan (CPP) provides contributors and their families with partial replacement of earnings in the case of retirement, disability or death. Almost all individuals who work in Canada outside Quebec contribute to the CPP.
The standard age to begin receiving a CPP retirement pension is when you reach age 65, which is the month after your 65th birthday.The Canada Pension Plan is a monthly benefit paid to elegible applicants.
The amount of pension you receive depends on your earnings and how much you have contributed while working.
The CPP is considered as taxable income.
If you have an employer, you pay half the required contributions and your employer pays the other half. If you are self-employed, you make the whole contribution.
The Canada Pension Plan is capped (age 65) at a maximum of $1,114.17 per month (2017).
B) Old Age Security (OAS)
The Old Age Security program is the Government of Canada’s largest pension program. It is funded out of the general revenues of the Government of Canada, which means that you do not pay into it directly. You can receive the Old Age Security (OAS) pension even if you have never worked or are still working.
The Old Age Security (OAS) pension is a monthly payment available to seniors aged 65 and older who meet the Canadian legal status and residence requirements. You may need to apply to receive it.
If you are living in Canada, you must:
- be 65 years old or older;
- be a Canadian citizen or a legal resident at the time we approve your OAS pension application; and
- have resided in Canada for at least 10 years since the age of 18.
If you are living outside Canada, you must:
- be 65 years old or older;
- have been a Canadian citizen or a legal resident of Canada on the day before you left Canada; and
- have resided in Canada for at least 20 years since the age of 18.
In addition to the OAS pension, there are three types of OAS benefits:
- Guarantee Income Supplement
- Allowance for the survivor
C) Registered Retirement Savings Plan (RRSP)
An RRSP is a retirement savings plan that you establish, that we register, and to which you or your spouse or common-law partner contribute. Deductible RRSP contributions can be used to reduce your tax.
Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan.
D) Supplemental Pension Plan (SPP)
Supplemental pension plans are available as employer to employee sponsorships. They come in two forms: defined benefit and defined contribution. The value of a defined benefit SPP is often a fixed percentage your salary multiplied by the number of years you have been employed. Your employer pays a fixed percentage of your salary into your plan. You must be at least 55 years old to withdraw funds from a supplemental pension plan.