Once upon a time, retirement age seemed to have a magic number. 65 to be exact. Hit it and retirement was guaranteed with at least another 20 golden years of life ahead of you.
Things have changed (especially in the financial space), but there are 2 big programs to help retirees out: CPP and OAS.
What are these programs, what are the differences between CPP and OAS? How do they work for retirees, and what rules exist to claiming them?
What are CPP and OAS?
So what exactly is CPP and OAS? In their most basic form, they are both retirement benefits programs for seniors in Canada.
Both programs are meant to provide supplemental income for Canadians as they age out of the workforce and progress into the later stages of life:
- CPP is a retirement benefit for those who work in Canada that they can pay into during their working life.
- OAS is simply a benefit for people who have resided in Canada for at least 10 years and are aged 65 and over.
On the surface, CPP and OAS seem like similar programs but there are marked differences between the two and different maximum amounts they pay out.
Let’s take a closer look at the programs.
Intro to the Canadian Pension Plan (CPP)
CPP is a retirement pension plan for Canadians 60 and older who have made valid contributions in the past.
A contribution is defined by work done in Canada in which you paid into CPP or if you received credits from a former spouse or partner at the end of a relationship.
The amount of CPP you receive is based on:
- your average earnings throughout your working life,
- your contributions to CPP, and
- the age you decide to start receiving the retirement pension.
All money received through CPP is taxable and you must apply to CPP in order to receive the retirement pension as you can choose to take CPP anytime between ages 60 and 70.
Canadians work their entire lives paying into CPP and it is really meant to be a supplement to your retirement income instead of something you solely rely upon.
That said, there are CPP enhancement programs that can add to the pension you receive.
This can be due to your:
- post-retirement benefits,
- disability pension,
- survivors pension,
- children’s benefit, and
- death benefit.
It’s important to note that the average CPP benefit currently received by Canadians is $727.61 per month.
The maximum you could receive as a new recipient at age 65 is $1,253.59.
In order to receive this you’ll need to have contributed to CPP for at least 39 years between ages 18 to 65. This is based on maxing out your yearly pensionable earnings set by CRA (in 2021, YMPE was $64,900).
Spouses or common law partners can also split CPP income (also called sharing or credit splitting).
Both people must be older than 60 years old and they can share up to half of their retirement benefit. The split between the couple is based on the number of years they lived together and contributed to CPP.
Intro to Old Age Security (OAS)
OAS is a monthly payment for Canadians 65 years and older. For some, you may be automatically enrolled into it while others need to apply. But either way, Service Canada will let you know when you are enrolled.
You receive your first OAS payment a month after turning 65.
You can also choose to delay your payment, but the later you delay, the higher your payment is later on. Many believe with these benefits, you should take them if eligible when they are available as there is no guarantee how long anyone lives.
To receive OAS, your annual income must be less than $129,757.
If your annual income is higher than $79,845 (in 2021), you will have to repay part of your OAS pension.
When applying for OAS, you should always consider your personal circumstances, be it your health, whether or not you are still working, and your retirement plans.
Here’s a chart of maximum benefits for each age bracket:
| Age | Maximum Benefit |
|---|---|
| 65 – 74 | $666.83 per month |
| 74+ | $733.51 per month |
There is also something called a Guaranteed Income Supplement (GIS).
Depending on your income and whether or not you are widowed (or if your partner receives a full OAS), you could qualify for more support.
Get in contact with Service Canada about CPP and OAS
To get an accurate idea of how much CPP you will receive, you can contact Service Canada as each person is different.
You can contact Service Canada at 1-866-866-0800. This number will work for both CPP and OAS, so if you have any questions or concerns, they should be able to help out.
What are the differences between CPP and OAS?
So what’s the difference between CPP and OAS when you chart them side by side?
The big difference is that CPP is a pension plan and you must have paid into it as a Canadian worker (or a former spouse/partner paid into it) in order to receive it.
| Government program | CPP | OAS |
|---|---|---|
| Who is eligible? | Canadians 60 and older who have made valid contributions to CPP or if Canadians who received credits from a former spouse or partner at the end of a relationship (credit sharing/splitting) | Canadians and those who have resided in Canada for at least 10 years and are age 65 and over |
| Where does the money come from? | Contributions you made during your work life | Government of Canada |
| Extra benefits available? | Yes | Yes |
| Maximum monthly payment for 2022? | $1,253.59 (65 years and over, max work life) | * $666.83 per month if you’re 65 – 74 * $733.51 per month if you’re over 74 |
| Taxable? | Yes | Yes |
| Clawbacks? | Yes | Yes |
| Split income with your spouse? | Yes | Yes |
| Available in all provinces? | Yes (Quebec has its own program called QPP) | Yes |
| Adjusted for inflation? | Yes | Yes |
Are you taking advantage of CPP and OAS?
Although similar, the two programs for retirees do have different intentions and outcomes for Canadians.
The idea is that there is a basic level of living that our hard-working elders can rely on, though it would be tough to solely live on it. The money is a supplement to personal savings, investments, or company pension plans.
Are you a retired Canadian who receives CPP and OAS? Are the programs fair, reliable, and easy to navigate? Are you retiring soon and calculating what you will receive for CPP and OAS?
Let us know what your experiences are!
FAQ
What are CPP and OAS?
In their most basic form, CPP and OAS are both retirement benefit programs for older Canadians. You can collect CPP at age 60 and OAS age 65.
What’s the difference between CPP and OAS?
There is a clear-cut line between CPP and OAS. Essentially CPP is a pension plan you pay into while OAS provides a basic stream of income for aging Canadians who have spent more than 10 years in the country.
How do I contact CPP and OAS for support?
The best way to contact CPP and OAS is through the government of Canada websites. You can also call them by phone for more immediate help at 1-866-866-0800.
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