Canada's retirement income system

Canada's retirement income system has three levels: Old Age Security ( OAS), the Canada Pension Plan (CPP) and private pensions and savings.

Old Age Security (OAS) Program

The Old Age Security program, the cornerstone of Canada's retirement income system, provides you with a modest pension at age 65 if you have lived in Canada for at least 10 years. If you are a low-income senior, you may be eligible for other benefits as early as age 60.

Guaranteed Income Supplement

The Guaranteed Income Supplement is a monthly benefit paid to residents of Canada who receive a basic, full or partial Old Age Security pension and who have little or no other income.

Unlike the basic Old Age Security pension, the Guaranteed Income Supplement is not subject to income tax.

Allowance and Allowance for the survivor

The Allowance, which also includes an allowance for persons whose spouse or common-law partner has died, is paid monthly. It is designed to recognize the difficult circumstances faced by many surviving persons and by couples living on the pension of only one spouse or common-law partner. These benefits are not considered as income for income tax purposes. To qualify, an applicant must be between the ages of 60 and 64. The Allowance stops when the recipient becomes eligible for an Old Age Security pension at age 65. The Allowance is an income-tested benefit. The maximum amount payable to the spouse or common-law partner of a pensioner is equal to the combined full Old Age Security pension and the maximum Guaranteed Income Supplement at the married rate.

In short, the OAS pension is paid monthly to persons aged 65 or over who meet the residence requirements specified in the OAS Act. The GIS is a monthly income supplement paid to OAS pension recipients who reside in Canada and have low income as specified under the program. The Allowance is an income supplement for persons aged 60 to 64 paid to spouses and common-law partners of GIS recipients as well as widow(er)s who have low income as set out under the program.

Note - Pensioners with an individual net income above $64,718 must repay part or all of the maximum Old Age Security pension amount. The repayment amounts are normally deducted from their monthly payments before they are issued. The full OAS pension is eliminated when a pensioner's net income is $105,043 or above. Your repayment calculation is based on the difference between your income and the threshold amount for the year. The first step is to figure out how much higher your income is than the threshold. Your repayment amount is 15 percent of that amount.

Old Age Security Payment Rates

As the second tier of Canada's retirement income system, the CPP provides a retirement pension, disability benefits, benefits for survivors, children's benefits and a death benefit.

Canada Pension Plan payments are taxable income.

You qualify for a CPP retirement pension if you have made at least one valid contribution (payment) to the Plan. The pension is designed to replace about 25 percent of the earnings on which a person's contributions were based.