Public pension plans are a key source of retirement income for Canadian residents.
Canada Pension Plan (CPP): Considered the foundation of Canadian government pension benefits, CPP is available to all Canadians who have earned an income during their working life. You are eligible to make contributions between 18 and 70. CPP is a monthly, taxable income for life. The amount you receive is determined by your average indexed work income, and when you decide to begin collecting. Put simply, the more you earn, up to the Year's Maximum Pensionable Earning (YMPE) set by the federal government, the more you'll receive after you retire.
You must apply for CPP between the ages of 60 and 70. If you start receiving your CPP pension earlier, the monthly amount you'll receive will be smaller. If you decide to start later, you'll receive a larger monthly amount. You may also qualify for other CPP benefits, such as survivor and disability pensions.
Old Age Security (OAS): A monthly income for life, paid out of Canada's general revenues, this pension benefit is available to all Canadians aged 65 and older, whether you have worked or not. Your OAS income is dependent on how long you've lived in Canada. The amount you receive is reduced if you were not born in Canada and have lived here for fewer than 40 years.
The OAS Program is managed by the federal Department of Employment and Social Development Canada through Service Canada. When you turn 65, it will inform you if you need to apply for the program or if you have been automatically enrolled. To increase your monthly amount, you can postpone your OAS payments up until the age of 70. Note that if your income exceeds a threshold, you'll have to repay part, or all, of your OAS pension. This is called OAS claw back.
If you're wondering how much you'll receive in CPP and OAS benefits, check out our calculators.