Government
Retirement Programs
Presented By: Ben Reale, CFP
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)
o $2,306.70 max employee portion contribution
o Self employed contributes 9.9% or $4,613.40
CPP benefits
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
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
o Navigate to Explore our site > Programs and
policies > CPP > CPP statement of
contributions online
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
o You must apply for this provision
• 16% of your lowest earning years (up to 7.5)
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
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
o Currently it is being updated to reflect the new
upcoming Post Retirement Benefits
Current vs. new rules
Old rules
New rules
Collecting CPP aged
60-64
Reduced by 6%/year or
0.5%/month
Reduced by 7.2%/year or
0.6%/month
Collecting CPP aged
66-70
Increased by 6%/year or
0.5%/month
Increased by 8.4%/year
or 0.7%/month
Under age 65,
collecting CPP and
still working
No contributions required
Contributions
mandatory towards Post
Retirement Benefit (PRB)
CPP at age 60/70
30% reduction/30%
increase
36% reduction/42%
increase
Age 65-70, collecting
CPP and still working
No contributions allowed
Additional contributions
to PRB voluntary
Low earning years
dropout provision
15% up to 7 years
16% up to 7.5 years
Starting to collect CPP
Must ‘substantially’ cease
work (2 month minimum)
No interruption needed
When should you start?
• Depends on your life expectancy
• Evaluate your retirement income needs and
where that income will come from
o Government programs, employer plans, Tax Free
Savings Accounts, Registered Retirement Savings
Programs, other personal assets
o 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
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
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
GIS eligibility
• Guaranteed Income Supplement
• Designed to assist low income seniors already
receiving OAS
• Income tested program
o Net income includes all sources of income
except OAS, GIS and allowance
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
OAS, GIS & Allowance benefits
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)
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 1-800454-8731
Will you have enough?
• Estimate your expenses in retirement
• Estimate your income in retirement
from all sources
• Will you have enough?
• STEW!
o Save more
o Take less
o Earn more
o Work longer
Questions & Answers
Thank you!
Presented By: Ben Reale, CFP