How much will you receive from public programs at retirement?

Public retirement plans, from the federal and Québec governments, guarantee a base minimum income at retirement, subject to certain conditions.

Benefits from the federal Old Age Security (OAS) program

* Details on the OAS program benefits

Old Age Security (OAS) pension

• The amount is determined based on the number of years of Canadian residency.
• The amount is taxable.
• For 2010, you must reimburse all or part of your OAS pension amount if your net individual income exceeds $66,733 (including the OAS pension). The total amount of this reimbursement is equal to 15% of your net income (including the OAS pension) that exceeds $66,733. However, you cannot reimburse an amount greater than your total OAS pension benefits. These reimbursements are usually deducted from the payments.
• No pension benefits are paid when net income exceeds $108,090.

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 for whom the pension request has been accepted.
• As indicated in the preceding table, there are 2 levels for the GIS :
   
  • The first ($652.51) 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 nor for the Allowance
  • The second ($430.90) applies when both spouses are pensioners. Each spouse is then eligible to his/her own benefit.
• The maximum annual income includes all income (combined for a couple), with the exception of the OAS pension. If your maximum annual income is greater than the indicated amounts, you will not receive GIS benefits. 
  • The OAS pensioner is single, widowed, divorced or separated: The maximum monthly amount is reduced by $1 for each $2 coming 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 nor for the Allowance: The maximum monthly amount is reduced by $1 for each $4 of combined monthly income, excluding the pensioner's OAS pension. Also, the first $1 decrease is only made once the total 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 from 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 amount of the OAS pension and the amount of the GIS at the rate of a spouse of a pensioner. The maximum monthly amount paid to a person whose spouse is deceased may be higher.
• The maximum annual income includes all income (combined for a couple), with the exception of the OAS pension. If your maximum annual income is greater than the indicated amounts, you will not receive Allowance benefits.
  
  
  • 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 such time that the portion of the benefit equivalent to the OAS pension is reduced to zero.
  • For a couple: The portion of the Allowance benefit equivalent to the GIS and the pensioner's GIS are then reduced by $1 for each additional $4 of the couple's combined monthly income.
  • For a surviving spouse: The portion of the benefit 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 a portion or the entire OAS pension ($66,733 in 2010) is revised annually in order to account for cost of living increases. All other amounts are revised every 3 months in order to account for cost of living increases. Note that these increases could be nil.

For more information on the amounts payable by the OAS program, consult www.servicecanada.gc.ca under the section entitled "Seniors". 

The Québec Pension Plan (QPP)

The amount of your pension benefit is based on the employment income on which you have contributed since 1966, the year in which the Québec Pension Plan began its operations, or since your 18th birthday. Each year, your employment income is recorded under your name in the QPP register, up to the maximum pensionable earnings ($47,200 in 2010). The amount of the pension benefit corresponds to 25% of the average of the recorded income.

You can begin receiving your pension when you turn 60 years of age, but the amount will be less than if you wait until you reach the normal retirement age, which is 65. The following table shows the maximum monthly amounts of the benefit for persons who started receiving it in 2008.

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 1 January 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 $11,800 in 2010
    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.
• If you receive a retirement pension under the Québec Pension Plan, you can still continue to work. As of 1 January 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 QPP register have been partitioned between the former spouses, the calculation of your pension benefit will take the partition into account.
• Some low or no income months can be excluded from the pension benefit calculation, up to a maximum of 15% of the contribution period. This increases the monthly average of your employment income and thus the amount of your pension benefit. The contribution 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 name, a Québec family allowance 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 the pension amount to which you will be entitled, 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 anytime.

For more information on payable benefits from the Québec Pension Plan, consult www.rrq.gouv.qc.ca/en under the section entitled "Retirement".

Canada Pension Plan (CPP)

Even though the Canada Pension Plan and the Québec Pension Plan 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 income recorded under both plans and the legislative provisions controlling the plan that pays your benefits.

For more information on the Canada Pension Plan, consult www.servicecanada.gc.ca under the section entitled "Seniors". 

Worth knowing about...

• The QPP pension benefit amount is not affected by other income you might receive at 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 from the OAS program are determined based on your other retirement income (benefits from the QPP or from the CPP, benefits from a supplemental pension plan, investment income, RRSP income, LIF or others).