I was in a Retirement Planning meeting with a client of mine. He is thinking of retirement in about 5-7 years. As we were working through some of the numbers he asked how the survivor pension that he collects will be affected by his CPP when he starts to receive that payment. That made me think that a review of the government benefits and how they work with each other would be a good topic for today.

CPP survivor benefit

The CPP Survivor Benefit is paid to the common-law partner or legal spouse of the contributor who has passed away. A reminder that if you are widowed more than once you can collect only one of the survivor pensions. CRA says you can collect the larger of the two pensions.

The dollar amount that you will receive is based on a few things. First, how long did the deceased contributor pay into the CPP and how much? Second, your age and thirdly, if you are receiving a CPP disability benefit or other retirement pensions.

To answer my client’s concern regarding his survivor pension and the inevitable collection of his CPP, he cannot receive the maximum CPP and maximum survivor benefit. The two will be combined into a monthly payment. The most that my client is allowed to receive is the maximum retirement pension.

Related article: Understanding CPP Survivor Benefits

CPP retirement pension

The Canada Pension Plan provides to Canadians who qualify a monthly retirement benefit. You can start collecting at age 65 but you can collect as early as age 60 at a reduced amount or after age 65 you can collect a higher amount.

Related article: Should you take CPP early?

The amount that you will receive will depend on how much you contributed and for how long. As of 2013, the maximum amount is 1012.50 with the average being 596.66 (March 2013, CRA web site). This is based on collecting at age 65.

Related article: How much will you get from the Canada Pension Plan?

Old Age Security (OAS)

Did you know that OAS is Canada’s largest pension program? It is. As Canadians, we do not pay into this plan directly as it is funded out general tax revenues. This program as we know it was started in the early 50s. You can go back as far as the mid-20s to find the earliest form of Old Age Security.

OAS is a monthly benefit paid to Canadians who are 65 or older who meet the necessary requirements. These requirements are that you are 65 or older, living here in Canada as a Canadian Citizen or legal resident and have lived here at least 10 years after turning the age of 18. There are also requirements of you are living outside of Canada when you want to start collecting this benefit. Again, 65 or older, you were a Canadian Citizen or legal resident the day before you left Canada and that you lived here for at least 20 years after turning 18 years of age. The maximum you can receive is 550.99 (Oct-Dec 2013).

Related article: The differences between CPP and OAS

The Clawback of OAS is, at least with the retirees that I come in contact with, a very hotly debated topic. Is Clawback a big concern? Is everyone being clawed back? OAS is subject to income testing. If you earn more than 70,954/year you will lose 15% of the net income exceeding that amount. Full clawback is at 114,793.

In Jim Yih’s article Minimizing Old Age Security Clawback, 5% of seniors receive a lower amount and 2% receive nothing. Perhaps it isn’t a concern but at the same time, we want our clients to pay the minimum amount of tax as possible and have more money in their pockets.

One last point on OAS, there is a change to the age on which a person can start to receive OAS. The age will change slowly from 65 to 67 starting in 2023. If you were born before April 1, 1958, you will not be affected by the age change.

Related article: Three big changes to OAS

Guaranteed Income Supplement (GIS)

Lastly, the GIS is another monthly benefit paid to Canadians who are receiving OAS and have low income. To qualify for the GIS you need to meet the following benchmarks:

1. Legal Resident of Canada
2. Receiving OAS
3. Your annual income (or if a couple, combined) is below the maximum.

There are varying scenarios on the amount of GIS you would receive, depending on annual income, whether your spouse is receiving OAS or you are the surviving spouse. The monthly payment can range from 495.30 to 747.11. Please go to the Service Canada website for a complete breakdown.

As you can see there are several government benefits that are available to Canadians when they enter their retirement years. With proper retirement planning, you can see how to incorporate these government benefits into your overall income stream to maximize your income.