Non-Employer Pensions - You May be Eligible

Pensions used to be common in the workplace.  Nowadays, pensions seems to be less and less prevalent, leaving retirement savings solely in the hands of employees.

 

If you're unfamiliar, a pension is:

 

A regular payment made during a person's retirement from an investment fund to which that person or their employer has contributed during their working life.

 

In other words, once certain individuals retire, they will continue to receive paychecks (or pension monies) until death.

 

Here are some of the Pension Plans that still exist:

 

  • College Pension Plan
  • Public Service Pension Plan
  • Teachers' Pension Plan
  • Municipal Pension Plan
  • Work Safe BC Pension Plan

 

Planning for retirement is becoming more and more important as fewer jobs provide employer pensions.  In addition, people tend to switch careers leaving limited opportunity for pension growth in companies that do offer pensions.

 

This makes it exponentially important to understand retirement planning including the government pensions available to you, aside from those provided by an employer.

 

Although, many of us may not receive an employer pension upon retirement, there are two pensions you may become eligible for.

 

Did you know…

 

That aside from employer pensions, two other pensions exist and can contribute to your retirement income.  They are: Old Age Security (OAS) and Canada Pension Plan (CPP).

 

1.  Old Age Security

...is a basic pension that is given to almost anyone in Canada 67 years or older who has lived in Canada for at least 10 years while over the age of 18.  This pension is indexed regularly to account for inflation. 

 

As of 2016 - the maximum monthly pension was $570.52.

 

Different from CPP, the OAS can be reduced, or 'clawed back' in the event your retirement income exceeds certain thresholds.  In 2015, if your net income exceeded $72,809 per year, the monthly OAS received would be reduced.

 

This pension is not tied to your 'working years' or 'earnings' during your working life.  It is purely offered to those who is 67 years or older and have lived in Canada for 10 years while over the age of 18. 

 

Because OAS is government funded by tax payers and a large portion of the population is turning 67 in the next 20 years, the cost to fund OAS will be threatened.

 

Where CPP can be transferred after death, OAS cannot be transferred to a spouse after death.

 

Check out this article for more detailed information on Old Age Security.

 

2.  Canada Pension Plan 

...is a pension plan backed by your, or your employer's contributions, and IS NOT backed by the government.  Where most Canadians will be entitled to OAS, not all will be entitled to CPP.

 

The amount of your Canada Pension Plan (CPP) retirement pension is based on how much you have contributed and how long you have been making contributions to the CPP at the time you become eligible. 

 

In 2013, the maximum benefits for those 65 and older was $1,012.50 per month.  Unsure of how much you've contributed during your working years - look at your T1 (tax filing from your accountant) - you should be able to see your annual CPP contributions.

 

Where OAS can be taken at 67, CPP can be taken sooner by age 60 (at a reduced rate) or at a full rate at age 65.

 

In summary, totalling both pensions at their maximums (based on the information in this article) $570.52 + $1,012.50 = $1,583.02.  Receiving this amount monthly during retirement is still not enough for most of us to live.  Other savings, like RRSP, TFSA and other investments will need to cover the difference.

 

Note:

To view contributions to EI (employment insurance), OAS (Old Age Security) or CPP (Canada Pension Plan), you can set up a My Service Canada Account.

 

At what age do you think it's worthwhile to learn about OAS and CPP?  How did you first learn about OAS and CPP?