Canada's retirement system is based on three programs:
The Canadian Pension Plan (CPP) or Québec Pension Plan (QPP)
Old Age Security (OAS)
Private employer-sponsored pensions or tax-deferred individual savings (Registered Retirement Savings Plans or RRSPs)
CPP is a contributory, earnings-related social insurance program for Canada. However, the Québec Pension Plan (QPP) takes the place of the CPP in the province. Québec is the only province in Canada that opted out of the CPP. Its purpose is to provide persons who work in Québec and their families with basic financial protection in the event of retirement, death or disability. The Plan's future is guaranteed, thanks to the amendments adopted in 2011.
The standard age for retirement is 65. However, Canadian labour laws do not specify a retirement age and one cannot be forced to retire according to age.
When you turn 60, you are eligible to receive a reduced CPP pension. Full benefits are available at 65, calculated as 25% of the average contributory maximum over your entire working life.
The QPP is funded by contributions made by Québec workers and employers. Workers over the age of 18 and whose annual employment income is greater than $3,500 must contribute to the public plan. Contributions are collected by Revenu Québec and are administered by the Caisse de dépôt et placement du Québec.
The contribution rate for the Québec Pension Plan is 10.05%. The rate applies to the portion of employment earnings between the basic exemption of $3,500 and the maximum earnings on which contributions (currently $50,100).
The QPP pays benefits in the event of the earner becoming disabled, retiring, or dies. Pensions calculated using the average of maximum pension earnings for the last 5 years.
For updated rates and information on disability pension, retirement pension supplement, pension for a disabled person's child, death benefit, surviving spouse's pension, and orphan's pension, consult www.rrq.gouv.qc.ca/en/programmes/regime_rentes/.
The Old Age Security pension is the cornerstone of Canada's retirement income system. It is a taxable monthly social security payment that provides a modest pension for long term residents. An applicant's employment history is not a factor in determining eligibility, nor does the applicant need to be retired. Service Canada, under the Department of Human Resources and Skills Development Canada (HRSDC) administers the Old Age Security program through regional offices located throughout Canada.
To qualify for an Old Age Security pension, a person must be 65 years of age or over*. In addition, they must:
A minimum of 10 years of residence in Canada (after reaching age 18) is required to receive a pension in Canada. A minimum of 20 years of residence in Canada (after reaching age 18) is required to receive a pension outside of Canada.
*In 2012, it was announced that in 2023 the retirement age at which individuals would be eligible for Old Age Security would rise to 67.
The Old Age Security program is financed from Government of Canada general tax revenues. Old Age Security pensioners pay federal and provincial income tax. Higher income pensioners also repay part or all of their benefit through the tax system.
Benefits include the basic Old Age Security pension, the Guaranteed Income Supplement, the Allowance, and the Allowance for the Survivor. As of January 2012, the basic OAS amount is $540 per month.
The amount of a person's pension is determined by how long he or she has lived in Canada, according to the following rules: A person who has lived in Canada, after reaching age 18, for periods that total at least 40 years, may qualify for a full Old Age Security pension;
A person who has not lived in Canada for 40 years after age 18 may still qualify for a full pension if, on July 1, 1977, he or she was 25 years of age or over, and
lived in Canada on July 1, 1977; or
had lived in Canada before July 1, 1977, after reaching age 18; or
possessed a valid immigration visa on July 1, 1977.
In such cases, a person must have lived in Canada for the 10 years immediately prior to approval of the Old Age Security pension application. Absences during this 10-year period may be offset if, after reaching the age of 18, the applicant lived in Canada before those 10 years, for a period of time that was at least three times the length of absence. In this case, however, the applicant must also have lived in Canada for at least one year immediately prior to the date of the application's approval. For example, an absence of two years between the ages of 60 and 62 could be offset by six years of residence or presence after age 18 and before reaching age 55.
All benefits payable under the Old Age Security Act are adjusted in January, April, July and October if there are increases in the cost of living as measured by the Consumer Price Index.
Once a full or partial Old Age Security pension has been approved, it may be paid indefinitely outside of Canada if the pensioner has lived in Canada for at least 20 years after reaching 18 years of age. Otherwise, payment may be made only for the month of a pensioner's departure from Canada and for six additional months, after which payment is suspended. The benefit may be reinstated if the pensioner returns to live in Canada and meets all conditions of eligibility.
The Guaranteed Income Supplement and the Allowance may be paid outside Canada for only six months following the month of departure from Canada regardless of the length of time you have lived in Canada.
Employer-sponsored pensions or tax-deferred individual savings are also available for additional coverage. Popular plans include Registered Retirement Savings Plans or RRSPs. Some plans are contributed to by both employee and employer, and contributions can be matched dollar for dollar or based on terms of employment and income. These plans are generally not dependent on residency or citizenship.
RRSP's allows full control over how much to save and where your savings are invested. You set up a registered retirement savings plan through a financial institution such as a bank, credit union, trust or insurance company. RRSP contributions are tax deductible, and interest earned prior to the time you begin withdrawing funds is tax free. When your RRSP begins to pay out, tax must be paid on this income. Most private retirement plans have been designed to provide income at age 65. December 31 of the year you turn 71 year of age is the last day you can make a contribution to your RRSP.
RRSP forms and regulations can be found on the Revenue Canada site.
Canada does not have a retiree immigration category, and no special visas or programs are offered to retirees. Most retirees can apply for immigration status under the "Investor/Entrepreneur/Self-Employed" or "Family" immigration categories. Retired persons moving to Canada must prove they have sufficient funds to support themselves. Consult the guide's "Passport, Visa & Permits" for more information.
A worker and his or her spouse may be entitled to a retirement, disability, surviving spouse's or orphan's pension paid by a foreign country. The following conditions must be met:
The International Operations Division in Ottawa is responsible for benefits stemming from Canada's International Social Security Agreements.
Ottawa ON K1A 0L4 CANADA
Toll-free in English or in French: 1-800-454-8731
Outside of Canada or the United States: 1-613-957-1954 (collect calls accepted)
You must include in your income the total amount of any pension you received from a foreign country after you became a resident of Canada. If all or a portion of the pension is exempt from income tax under a tax treaty or an agreement concluded between the country in question and Québec, you can claim a deduction for income exempt under a tax treaty. The International Tax Services Office of the Canada Revenue Agency (Tel: 1-613-941-2505) can provide information on tax treaties and agreements. Listing of countries with a tax agreement.
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