How much will you receive from public programs in retirement?

Public retirement plans from the Governement of Canada and the Gouvernement du Québec provide a basic minimum income in retirement, subject to certain conditions.

Benefits from the federal Old Age Security program

* Details on Old Security program benefits

Old Age Security (OAS) pension

• The amount is determined based on the number of years of residency in Canada.
• The amount is taxable.
• For 2013, you must reimburse all or part of your OAS pension if your net individual income exceeds $70,954 (including the OAS pension). The total amount of this reimbursement is equal to 15% of your net income (including the OAS pension) that exceeds $70,954. However, you cannot reimburse an amount greater than your total OAS pension. These reimbursements are usually deducted from the payments.
• No pension is paid when net income exceeds $114,640.

Guaranteed Income Supplement (GIS)

• To be eligible for the GIS, you must be a pensioner, that is, a person who receives an OAS pension or whose pension request has been approved.
• As indicated in the preceding table, there are 2 levels for the GIS:
  
  • The first ($740.44) applies to single pensioners, including widowed, divorced or separated persons, as well as in the case where only one spouse is a pensioner and the other is not eligible for the OAS pension or the Allowance
  • The second ($490.96) applies when both spouses are pensioners. Each spouse is then eligible for his or her own benefit.
• The maximum annual income includes all income (combined for a couple), with the exception of the OAS pension. No GIS is paid if your maximum annual income is greater than the indicated amounts.
  • The OAS pensioner is single, widowed, divorced or separated: The maximum monthly amount is reduced by $1 for each $2 from another monthly income source, excluding the OAS pension
  • Both spouses are OAS pensioners: The maximum monthly amount for each person is reduced by $1 for each $4 of their other monthly combined income, excluding their OAS pensions
  • Only one spouse is an OAS pensioner and the other is not eligible for the OAS pension or the Allowance: The maximum monthly amount is reduced by $1 for each $4 of combined monthly income, excluding the OAS pension. Also, the first $1 decrease is only made when the combined income for the couple reaches an amount equal to 12 times the monthly OAS pension plus $48.
• GIS benefits are not taxable.
• If you receive a partial pension under the OAS program, the maximum amount of your GIS benefits could be increased.

Allowance and Allowance for the survivor

• The maximum monthly amount is equal to the sum of the OAS pension and the GIS at the rate of a spouse of a pensioner. The amount paid to a person whose spouse is deceased could be higher.
• The maximum annual income includes all income (combined for a couple), with the exception of the OAS pension. No Allowance is paid if your maximum annual income is greater than the indicated amounts.
  
  
  • The amount is reduced by $3 for each $4 of the surviving spouse's monthly income or the couple's combined income. This applies until the portion of the benefit equivalent to the OAS pension is reduced to zero.
  • For a couple: The pensioner's GIS and the portion of the Allowance equivalent to the GIS are then reduced by $1 for each additional $4 of the couple's combined monthly income.
  • For a surviving spouse: The portion equivalent to the GIS is reduced by $1 for each additional $2 of his or her monthly income.
• Allowance benefits are not taxable.

General comments

• All benefits are paid on a monthly basis.
• The net individual income above which you must reimburse all or a portion of the OAS pension ($70,954 in 2013) is revised annually in order to account for increases in the cost of living. All other amounts are revised every 3 months in order to increases in the cost of living. Note that these increases could be nil.

For more information on the amounts payable under the OAS program, consult www.servicecanada.gc.ca.

The Québec Pension Plan

The amount of your retirement pension is calculated on the basis of the employment earnings on which you have contributed since 1966, the year in which the Québec Pension Plan (QPP) started, or since your 18th birthday. Each year, your employment earnings are recorded under your name in the Record of Contributors of the QPP, up to the maximum pensionable earnings ($51,100 in 2013). The amount of the pension corresponds to 25% of the average of the recorded earnings.

You can begin receiving your pension when you turn 60 years of age, but it will be less than if you wait until you reach the normal retirement age, which is 65. The following table shows the maximum monthly pension for persons who started receiving it in 2013.

Changes to the actuarial adjustment factor for retirement pensions

• Before you turn 65

  A retirement pension that begins between your 60th and 65th birthdays is currently reduced by 0.5% for each month remaining before your 65th birthday. Beginning on January 1, 2014, this rate will increase progressively from 0.5% to 0.6% between 2014 and 2016. The rate will go up based on the amount of the pension, remaining at 0.5% for individuals with very low pensions and rising to 0.6% for those who receive the maximum pension. If you were born before January 1, 1954, this change will not affect you.

• After you turn 65

  A pension that begins after you turn 65 is currently increased by 0.5% for each month between your 65th birthday and the date your pension begins, up to the maximum age of 70. As of January 1, 2013, this rate will increase to 0.7% per month.

Details on the retirement pension under the Québec Pension Plan

• To receive your retirement pension, you must apply for it 1 to 3 months prior to the date on which you wish to receive your first payment.
• The pension is taxable.
• The pension is indexed to increases in the cost of living on January 1 of each year. Note that this increase could be nil.
• The pension is paid on a monthly basis.
• If you are 65 or over, you can receive your retirement pension even if you are still working.
• If you are between 60 and 65, you must stop working in order to receive your retirement pension, unless:
  
  
  • your estimated employment earnings for the 12 months following the date on which payment of your pension starts do not exceed $12,775 in 2013
    or
  • your salary is reduced by at least 20% per pay period, based on a mutual agreement with your employer to reduce your work hours.
• As of January 1, 2014, individuals age 60 and over who contributed to the Plan for at least one year will be able to apply for their retirement pension even if they are still working. Under the current requirements, a worker must have stopped working or have an agreement with his or her employer concerning the reduction of working hours in order to receive a retirement pension before age 65. These requirements will be abolished as of January 2014.
• If you receive a retirement pension under the QPP, you can still continue to work. As of January 1, 2009, your pension will increase by an amount equal to 0.5% of the earnings on which you contributed during the previous year. The retirement pension supplement is spread over 12 months and will be cumulative if you work for several more years.
• If you are divorced or separated and earnings recorded under your name or your spouse's name in the Record of Contributors of the QPP have been partitioned between you and your former spouse, the calculation of your pension benefit will take the partition into account.
• Certain months in which you earnings were low or nil can be excluded from the calculation of your pension, up to a maximum of 15% of your contributory period. This has the effect of raising your average monthly earnings, thus increasing the amount of your pension. However, the contributory period must be at least 120 months. Other months can be excluded from the contribution period, such as:
  
  
  • months in which you received, in your own name, family allowances from Québec or a Canada Child Tax Benefit for a child younger than 7 years old, or the months in which you were eligible for such allowances without receiving payments
  • months for which a disability pension from the Régie des rentes du Québec was paid to you
  • months in which an unreduced salary replacement indemnity was paid to you by the Commission de la santé et de la sécurité du travail (CSST), if the indemnity was paid after December 31, 1985.

To obtain an estimate of your retirement pension, consult your Statement of Participation. The Régie des rentes du Québec automatically sends this Statement to contributors every 4 years. You can also request a copy at any time.

For more information on amounts payable under the QPP, consult www.rrq.gouv.qc.ca/en.

Canada Pension Plan

Although the Canada Pension Plan (CPP) and the QPP are very similar, they are not identical. Regardless of which plan pays your benefits, the amount of the benefits will be determined based on your employment earnings recorded under both plans and the legislative provisions governing the plan that pays your benefits.

For more information on the CPP, consult www.servicecanada.gc.ca.

Worth knowing about...

• Your retirement pension under the QPP is not affected by other income you might receive in retirement.
• It is estimated that you will need about 70% of your annual income to maintain your standard of living once you retire. Public plans replace only about 40% of an annual salary of $40,000, so personal savings are necessary. If your annual income is less than $20,000, benefits from public plans should be sufficient.
• Benefits under the OAS program are determined based on your other retirement income (benefits under the QPP or the CPP, benefits from a supplemental pension plan, investment income, or income from an RRSP, a LIF or other plans).