Understand Canada
Fresh Life Canada

Pension and Social Security

As you age into retirement, it is important that you have the funds that will support you when you are no longer able to work.  One of the largest benefits to living in Canada is the Pension and Social Security model.  These systems, funded by taxpayer dollars, make up one of the world’s biggest pension funds.

Combined with individual retirement savings, the social safety nets of the Canadian Pension Plan (CPP) and Old Age Security (OAS) will help provide income for you in your retirement years.

Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program. The amount of CPP that you will collect is directly tied to the contributions you mad while you were still working.

To qualify for the maximum amount, you must have contributed at least 83% of the time that you were eligible to contribute. Each year that you work, and contribute to CPP, the more you add to your eligibility. The average CPP payment is just over $640 per month.

Old Age Security (OAS) Pension

Canadians become eligible for Old Age Security (OAS) when they turn 65.  It is a monthly payment, not dependent on your employment history.  You may be able to claim OAS even if you are still working, or if you never worked in Canada.

You are eligible if you are:

  • Aged 65+
  • If you are living inside of Canada: A Canadian citizen or legal resident, and have lived in Canada for at least 10 years since 18 years of age
  • If you are living outside of Canada: A Canadian citizen or legal resident, and have lived in Canada for at least 20 years since 18 years of age.

The amount you receive is dependent on how long you lived in Canada.  Those who have lived 40 years of their adult life in the country will receive the maximum amount. 

Note that if your income is higher than $79,845 in your retirement years, the government will “clawback” part of your benefit.  As with most taxes in Canada, there are ways to mitigate the amount of tax you pay, by either income splitting or contributing back a portion of your income to registered retirement funds.

Individual Investments

While Canada’s social safety net is quite extensive, do not plan your retirement on CPP and OAS alone as this number is relatively small.  To calculate how much you can expect from these programs, you can use this calculator

Ensure that you are supplementing the amount you receive from the government with your own savings.  The Canadian government offers plenty of individual investment options for retirement, including RRSPs, which allow you to defer your income tax payments.  When you are at retirement age and ready to access those funds, you will often pay a much lower rate of tax, lowering your overall tax payments.  This will ensure you are comfortable in your retirement, and able to provide for more than just your basic needs.

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