Overview of the Canadian Pension Plans and Retirement Benefits in Canada

Today we will de-mystify how much you get from Canada as a pension plan. This is NOT including your retirement pension plans from your employer, your RRSP or TFSA earnings or savings.

This is simply talking about what CANADA will give you based on being … a Canadian citizen (and/or a few eligibility rules).

There are 3 government pension plans in Canada:

1. Canadian Pension Plan (CPP) – What most people have
2. Old Age Security (OAS) – What is a supplement (under $129K income)
3. Guaranteed Income Supplement (GIS) – A rock bottom safety net

1. Canadian Pension Plan (CPP)

Determined by how much you earned as income in Canada (earned income, like T4 slips).

• Eligibility is based on INCOME you have earned in Canada
• What you get, depends on how much you earned (and contributed) towards the plan
• You are the one who contributed to CPP along with other Canadians via your payslips
• In Québec it is the QPP (Québec Pension Plan, natch)

Example: I did not work very much in terms of a salaried job, so my CPP is negligible. I think I saw it once and it was $200 a year if I am not mistaken.

How do I get them?

• They’re not automatic
• You must apply online in advance of when you want your pension to start
• If you live in Québec you need to use Retraite Québec to see your CPP which is a lot like Service Canada in terms of services provided to see tax slips and so on

When do benefits start?

• You can start at age 60 – 70
• If you defer them, you will get more money because the earlier you take them out, the less time it has to grow, so they give you less money versus if you waited until 70 for maximum growth
• They are TAXABLE benefits

2021 Limits

• $61,600 is the maximum CPP earnings you can have

2. Old Age Security (OAS)

Determined by how long you lived in Canada after the age 18.

• Eligibility is based on RESIDENCE in Canada not working years
• Must have lived in Canada for 10 years since age 18
• You can live outside of Canada as well but have to had lived in Canada for 20 years since the age of 18 and had been a legal resident or citizen when you left Canada

How do I get them?

• Service Canada automatically enrolls you if you’re eligible
• You will get a letter at 64 stating you’re eligible (or you can go online and apply for it via your Service Canada Account)

When do benefits start?

• Benefits start between age 65-70
• They are TAXABLE benefits
• You can defer the benefits to later & get more money
• How much you get, depends on your income
• (The more you make, the less you get)
• It is not the same as the Guaranteed Income Supplement (GIS) which is for the truly poor (you do not want to qualify for this one if you can help it)
• Your income is less than $129,260 but it is tiered. At $129,261 you receive $0 in OAS

2021 Limits

• $618.45 per month = $7421.40 annually
• Amounts are adjusted based on the Consumer Price Index (CPI)

3. Guaranteed Income Supplement (GIS)

Determined by a very VERY low income level – you have to hit rock bottom to get this. You basically don’t want to qualify for this.

How do I get them?

• You must be a Canadian citizen or legal resident
• It is tied to your income but not employment, meaning what you report as income, but not how many years you have worked
• Basically, if you’re earning or receiving a very low income, you can qualify
• You do not need to contribute to it, the government does it on your behalf via others’ taxes
• It takes into account other pension income, foreign income, employment (EI) benefits, interest income, taxable gains, net income from rental properties, self-employment income, alimony, worker’s compensation….
• You basically need to have VERY LITTLE INCOME to even qualify for this, a serious rock bottom situation (like my aunts / uncles)

When do benefits start?

• It is a NON-TAXABLE benefit for low-income seniors in Canada
• Benefits start at age 60-64
• You are automatically enrolled by Service Canada – you can contact them if you don’t get a letter after age 64
• You must apply if you are already getting OAS but did not get GIS or if you get a letter about it
• If you are single, widowed or divorced, your income must be less than $18,744
• If you have a spouse or common-law partner and they have the full OAS pension, your income plus theirs must be less than $24,768
• If you have a spouse or common-law partner and they have NO OAS pension OR ALLOWANCE, your income plus theirs must be less than $44,928
• If you have a spouse or common-law partner gets the Allowance* as well, (see below under Allowance Plans linked to GIS), your income plus theirs must be less than $44,928

Allowance Plans linked to GIS

The “Allowance” which is for low-income individuals between 60-64 who have a spouse or common-law partner who is a GIS recipient.

The “Allowance for the Survivor” is for low-income individuals aged 60-64, widowed and residing in Canada.

It all depends on marital status, previous year’s income.

2021 Limits

• $923.71 if you are single, widowed or divorced
• $556.04 if your spouse gets full OAS (plus household rules above)
• $923.71 if your spouse does not get OAS or Allowance (plus household income rules above)
• $556.05 if your spouse receives Allowance (plus household rules above)

What does this all mean for you?

CPP is really the plan that most people will end up having, in addition to their employer pension plans if they qualify. You get that money, you pay taxes on it, life goes on. Plus you likely also have RRSP and TFSA investments, so … you’re in decent shape, more or less.

OAS and GIS in my mind, are plans that are meant to help those who cannot help themselves or need help. I am imagining 100%, my own extended family members who do not live in Canada (they live in the U.S.) and are currently in this boat, and since they do not have such comfortable safety nets, they are relying on me to help them financially.

In terms of OAS which starts the clawing back around the $79K mark up to $129K where you get bupkiss (as in $0 in OAS), that’s quite a lot of money for a household if you’ve reached that level of income via investments, CPP or pension plans from your employer.

If you make more than that and you’re annoyed you are not getting OAS, or upset about having it clawed back because you make too much …… I don’t know what to say. I really don’t. And I am giving you the side eye.

You should be happy you make so much that you don’t need OAS, even if it gets clawed back. I myself am aiming for this, to not ever have to even get OAS because I make too much damn money off my investments to qualify ($129K a year being the goal, then!)

As for GIS, same thing applies. If you’re hoping to “cash in” and maximize on the government bare minimum, subsistence plan for extremely poor seniors, then I also do not have any words for you.

If you are however, someone who NEEDS GIS for whatever reason, by all means, don’t ignore it and take what you need to live. It’s there for you as your safety net and the only people who should feel guilt are the ones raking in the dough and trying to also take the crumbs from those who are starving.

I assume $0 from Canada for myself

My personal take on this is to not assume I will get anything from CPP, OAS or thank goodness, GIS as I won’t even qualify even today.

My CPP is already a measly $200/year or so, and I may get some OAS if I cannot reach my income goal of $129K by the time I turn 60-ish.

I definitely, do not want to qualify for GIS however. 100% do not want to be there.