1. Canada’s Public Pensions

2. Canada’s Retirement Income System
PUBLIC
PRIVATE
Canada Pension
Plan / Quebec
Pension Plan
Old Age Security
Program
Private pensions
and savings
The CPP retirement pension and the OAS benefits provide a modest base on which to build retirement income. Private savings is key to ensuring adequate retirement income (e.g. RRSPs, employer pension, tax-free savings account).
Max CPP retirement pension (per month) for $
Max OAS pension (per month) for 2011 (March - June 2011) - $526.85

3. Canada Pension Plan Began in January 1966
Employment-based contributions
Payable outside Canada
Québec has a program with similar benefits (QPP)
Taxable

4. CPP Statement of Contributions
Is mailed regularly to contributors
View and print it from “My Service Canada Account”
Can be mailed to you upon request

5. Canada Pension Plan (CPP) Benefits
Retirement pension
Disability benefit
Children’s benefit
Survivor benefits
Death benefit
Survivor’s pension

6. Modernizing the Plan The Canada Pension Plan and Societal Trends
Canadians are living longer and healthier lives, and this is creating greater opportunities for employment later in life.
Changes to the Plan may affect how and when contributors choose to retire from work and when they decide to apply for a CPP retirement pension.
The amendments ensure that the Plan remains fair and secure as it responds to socio-demographic changes and labour market trends.
These amendments will be implemented gradually from 2011 to 2016.

7. Summary of Amendments Amendment 1
Bring the adjustment factors, for retirement pensions taken before and after age 65, back to neutral values.
Amendment 2
For workers receiving a CPP retirement pension*, contributions are required until age 65 and then voluntary until age 70 for additional pension benefit.
Amendment 3
Eliminate the requirement to stop working or reduce earnings in order to qualify for a CPP retirement pension before age 65.
Amendment 4
Enhance the general drop-out provision to exclude up to an additional year of low earnings from the benefit calculation.
* Those who receive a retirement pension from the Quebec Pension Plan and return to work are required to pay contributions.

8. Adjustment to the Actuarial Factor
The actuarial factor is the adjustment made to retirement benefits depending on whether a person retires before or after age 65.
Effective Date: January 2011
Amendment 1
Bring the adjustment factors
for retirement pensions back
to neutral values.
Currently, there is a financial advantage for early retirees while late retirees are not adequately compensated for delaying their pensions.
As Canadians will retire in record numbers over the coming years and given that life expectancy has increased from when the adjustments were set in 1987, it is crucial to correct the imbalance. 8

9. Making pre and post-age 65 Adjustment Factors Neutral
Legislative change: The adjustment factors will make the CPP more neutral so early retirees do not benefit more from the CPP than later retirees (age 65 or later).
(Pre-Change:
Age 60: reduced by 30%
Age 70: increased by 30%
New factors:
Age 60: reduced by 36% (2016)
Age 70: increased by 42% (2013)

10. Gradual Implementation of Changes to Adjustment Factors
Gradual decrease of pre-65 adjustment factors will begin in 2012:
2009
-30%
2016
2012
2013
2014
2015
-31.2%
-32.4%
-33.6%
-34.8%
-36%
notice period
Gradual reduction of pre-65 adjustment in the monthly actuarial factor for each year.
The increase of post-65 adjustment factors will be implemented at a faster rate starting as of 2011:
Year
% (monthly reduction)
2012
0.52
2013
0.54
2014
0.56
2015
0.58
2016
0.60
2009
+30%
2013
2011
2012
+34.2%
+38.4%
+42%
notice period
The following table outlines the increase in the monthly actuarial factor for each year for post 65 adjustment factor.
Year
% (monthly increase)
2011
0.57
2012
0.64
2013
0.70 10

11. Post-retirement Contributions to CPP
Amendment 2
For workers receiving a CPP
retirement pension, contributions
are required until age 65 and
then voluntary until age 70 for an
additional pension benefit.
Working beneficiaries need an opportunity to continue to build low-risk retirement benefits at a good rate of return.
Effective Date: January 2012
Less than 10% of retirees receive a maximum CPP retirement pension ($986 January 2012); pensioners receive on average $ monthly (September 2010).
This change will encourage older beneficiaries to continue working once they start receiving their CPP retirement benefits.
The changes will allow workers receiving CPP retirement benefits to add an additional pension benefit. 11

12. Additional CPP Pension Benefits
Legislative change:
Starting in 2012:
Under age 65: contributions mandatory for contributor and their employer.
Between 65-70: contributions optional. If individual chooses to contribute, their employer will have to contribute also.
(Election to Stop Contributing to CPP CPT30 form to be completed)

13. Post-Retirement Benefit
An individual who works and contributes to CPP while receiving a CPP retirement pension will get a post-retirement benefit (PRB) as a payment separate from their CPP pension.
PRB will not be subject to the maximum pension rules (not allowing payments above the maximum retirement pension).
Contributions made while receiving a CPP retirement pension cannot create eligibility or increase the amount of disability or survivor’s benefits. They are strictly used for post-retirement benefits.

14. Work Cessation Test (Eliminated) Amendment #3
Legislative change: Effective January 2012
No need to stop work or reduce hours of work to qualify for a Retirement pension before age 65.
Will provide greater flexibility for those who choose to receive their retirement pension before age 65. It will enable them to receive their retirement pension while working.

15. Low Earnings in Contributor’s Work Life
General Drop-out provision acts as a buffer for time spent out of workforce or of low earnings. Excluding a portion of the earnings history from the calculation allows for an increase in the amount paid.
Effective Date: January 2012 to 16% & January 2014 to 17%
Amendment 4
Enhance the general drop-out
provision to exclude up to an
additional year of low earnings
from the benefit calculation.
Current CPP retirement pension rules are based on a 47-year work life. In reality, today, people are in and out of the labour force for various reasons (e.g. at school, laid-off, providing care, etc.).

16. Allowing More Periods of Low or No Earnings to be Dropped from Calculation
Example
Harriet Keane is a high school teacher.  She started university at age 18 and completed two post-secondary degrees over five years, then started teaching immediately and always earned more than “average wages”.  In her late 40s, she took a two-year leave of absence from work to care for her mother.  She plans to take her CPP retirement pension after she turns 60 in 2015.  Harriet will be able to drop all her years spent in post-secondary education and care-giving from her pension calculation.  Her pension amount will be $8,359 in 2015, and will increase each year with the cost of living.  Without the proposed change, her pension amount in 2015 would have been $8,202 (growing annually with the cost of living).    

17. Summary of effective dates of the changes
Actuarial Adjustment Factors
January 2011: Increase post-65 adjustment factors
January 2012: Increase pre-65 adjustment factors
Allow working CPP retirement recipients to build a Post Retirement Benefit
January 2012
Allow contributors to continue to work while they are receiving their CPP retirement benefit
Enhance Drop-out Provision
January 2012 and January 2014

18. Choices depend on an individual’s wants and needs
When deciding whether to apply for the CPP retirement pension prior to age 65, at age 65, or up to age 70, contributors should consider their personal life circumstances.
Health
Life expectancy
Stream of income – current and future
Employment status now and in the future
Employment history
Whether CPP pension credits were split following a divorce
Plans for retirement

19. Things to Consider
The new adjustment factors will further increase the pension for those who start receiving it after 65, and further reduce it for those who start receiving it before age 65.
If a contributor stops working permanently or significantly reduces their earnings at the end of their work life, it is often beneficial to start their CPP retirement pension at the time of this transition.
Otherwise, the nil or lower earnings at the end of the contributory period may reduce the retirement pension and may potentially lower the overall benefits payable.

20. Canada Pension Plan 2011 to 2016 Early CPP Retirement Table (using 2012 RTR rate of $986.67)
Age
when CPP starts
2010/2011 60
Eff:
Eff: 2013
Eff: 2014
Eff: 2015
Eff: 2016
Months CPP taken early:
- 60 mos
CPP will be reduced:
30%
31.2%
32.4%
33.6%
34.8%
36%
Monthly payments: *
$690.66
$678.83
$666.99
$655.15
$643.31
$631.47
Monthly decrease: **
$296.01
$307.84
$319.68
$331.52
$343.36
$355.20
Total of payments prior to 65: ***
$41,440
$40,739
$40,019
$39,309
$38,599
$37,888
Make-up time in months: ****
140
132
125
119
112
107
Make-up time in years: ****
11.67 11
10.43
9.88
9.36
8.89
Break-even point is at age: **** 77 76 75 74 73

21. Canada Pension Plan 2012 Early CPP Retirement Table Maximum CPP retirement pension payable (age 65) in 2012 is $986.67
Age
when CPP starts 60 61 62 63 64
Months CPP taken early:
- 60 months
- 48 months
- 36 months
- 24 months
- 12 months
Percent that CPP will be reduced:
31.2%
24.96%
18.72%
12.48%
6.24%
Monthly payments: *
$678.83
$740.40
$801.97
$863.53
$925.10
Monthly decrease: **
$307.84
$246.27
$184.70
$123.14
$61.57
Total of payments prior to 65: ***
$40,729.80
$35,539.20
$28,870.92
$20,724.72
$11,101.20
Make-up time in months: ****
132
144
156
168
180
Make-up time in years: ****
11.03
12.03
13.03
14.03
15.03
Break-even point is at age: **** 76 77 78 79 80

22. Pension Sharing
For couples who live together, are at least 60 years of age, and apply for or receive CPP/QPP retirement pensions:
If there is a difference in the amount of retirement pension you or your spouse/common-law partner receive, you can request to share your retirement pensions.
If only one of you is a CPP contributor, you share that one pension.
The overall benefits paid do not increase or decrease with pension sharing.

23. Credit Splitting Application procedures.
The contributions a person makes into the CPP over the years becomes their “CPP pension credits”.
“Credits” may be divided upon divorce, legal annulment or separation of spouses or common-law partners.
“Credits” may create eligibility or increase/ decrease entitlement to CPP benefits.

24. CPP Drop Out Provisions
Periods of CPP Disability
Periods over age 65
Periods during which children were raised up to age 7 (Child Rearing)
16% of the lowest earning years in the contributory period ( – 17% 2014) (calculated on remaining years)

25. Drop-Out Provisions Example:
January
1966
Year 2012 Age 65 2 1 3 3
Contributory Period 47 Years 25 years after drop-outs
(approximate only as calculation actually uses months)
1. Periods of disability (1985 to 1995) 11 Years
2. Raising children (1968 to 1974) 7 Years
3. 16% ( = 29 years x 16%) approx. 4 Years

26. Canada Pension Plan Disability Benefits

27. CPP Disability Benefit General Eligibility Criteria
Application procedures
Age requirements

28. CPP Disability Benefit Contribution requirements
You must have made sufficient valid contributions to the CPP in four of the last six years; or
As of March 3, 2008, you may qualify if you have:
25 years or more of contributions; and
Made sufficient valid contributions to the CPP in three of the last six years.

29. CPP Disability Benefit Medical requirements
You must have a mental and/or physical disability that is both severe and prolonged.
Severe: Unable to regularly pursue any substantially gainful occupation. (This means that your medical condition prevents you from doing any type of work on a regular basis).
Prolonged: The disability is of indefinite duration or is likely to result in death.

30. CPP Disability Benefits Late Applicants
Protects you if you are late in applying.
You must meet the minimum qualifying period at the time CPP considers you disabled.

31. Canada Pension Plan Survivor’s Benefits

32. Death Benefit
Survivor’s Pension
Children’s Benefit

33. Death Benefit Application procedures Minimum contribution requirements
Payment entitlement
Maximum amount of $2,500

34. Survivor’s Pension General Eligibility Criteria
Who is eligible?
Minimum contribution requirements
Application procedures

35. CPP Child’s Benefit
Payable to the dependant child of a deceased contributor or of a disability recipient.
Child must be under the age of 18 or between 18 and 25 and in attendance at school full time.
Child may be eligible to a maximum of 2 benefits.

36. Old Age Security Benefits
Old Age Security pension (OAS)
Guaranteed Income Supplement (GIS)
Allowance
Allowance for the Survivor

37. OAS Pension – Residency & Entitlement
You may qualify for a full OAS Pension if:
You have resided in Canada for at least 40 years after age 18 and before your application is approved; or
You meet the 10 year residence rule.
If you cannot meet the requirements for the full OAS pension:
You may qualify for a partial pension:
If you have resided in Canada for at least 10 years after the age of 18.

38. Portability To Receive OAS Outside of Canada you must:
have 20 years of residence in Canada after age 18; or
meet the 20-year residence requirement through an International Social Security Agreement.

39. OAS Pension – Repayment of Pension
OAS pension higher-income pensioners
Net World Income from $67,688 to $107,123 (2011)
15% for residents, varies for non-residents
Based on previous year’s income
Monthly deductions from OAS pension
CRA International Tax Services Office
(Canada or U.S.)
Request to reduce OAS Recovery Tax at Source T1213(OAS)

40. GIS - Eligibility Must: Be in receipt of an OAS pension
Reside in Canada
Apply in writing

41. Allowance - Eligibility
Must be:
Between the ages of 60 and 64
The spouse/common-law partner of a GIS recipient
A Canadian citizen or a legal resident (same as OAS)
A resident of Canada for at least 10 years after age 18 (can be met through one of Canada’s International Social Security Agreements)

42. Allowance for the Survivor - Eligibility
Must be:
Between the ages of 60 and 64
A survivor
A Canadian citizen or legal resident (same as OAS)
A resident of Canada for at least 10 years after age 18 (can be met through one of Canada’s International Social Security Agreements)

43. Portability
The GIS, Allowance, and Allowance for the Survivor may only be paid outside of Canada for…
…the month of departure, and the following 6 months.

44. International Social Security Agreements
Co-ordinates the pension programs of two countries for contributors who lived and/or worked in both countries. This way, contributors would qualify:
for CPP benefits (Disability or Survivor) if they lived and/or worked in Canada;
For OAS benefits, if they lived and/or worked abroad & have some residence in Canada
for foreign benefits if they lived and/or worked abroad.

45. International Agreements
Iceland
Ireland
Israel
Italy
Jamaica
Japan
Jersey and Guernsey
Korea
Latvia
Lithuania
Luxembourg
Malta
Macedonia
Mexico
Morocco
Netherlands
New Zealand
Norway
Philippines
Poland
Portugal
Romania
Saint Kitts and Nevis
Saint Lucia
Saint Vincent and the Grenadines
Slovak Republic
Slovenia
Spain
Sweden
Switzerland
Trinidad and Tobago
Turkey
* United Kingdom
United States
Uruguay
Antigua and Barbuda
Australia
Austria
Barbados
Belgium
Chile
Croatia
Cyprus
Czech Republic
Denmark
Dominica
Estonia
Finland
France
Germany
Greece
Grenada
Hungary
* Limited agreement

46. For More Information… Click www.servicecanada.gc.ca
Call CPP/OAS Call centre
(English)
(TTY)
Visit a Service Canada Office
Go to
Select “Find a Service Canada Office” for a list of all offices

47. Questions

48. 48