Pensions In Canada

Pensions in Canada can be public, private and collective, or come from individual savings.  Of course, there is also the option to turn your home into a pension by taking out a reverse mortgage in Canada.

The Canada Pension Plan (CPP) forms the basic state pension system. All those employed aged 18 or older must contribute a portion of their income to a pension plan. In all provinces and territories except Quebec, these plans are administered by Employment and Social Development Canada, while Quebec administers them separately with the Quebec Pension Plan (QPP). Upon retiring, a contributor receives regular CPP pension payments equal to 25% of the earnings on which CPP contributions were made over the entire working life of a contributor from age 18 in constant dollars.  For more on this read about who is eligible for a pension in Canada.

Adjustments are made according to the Consumer Price Index. Although one can claim a CPP pension at age 60 rather than the typical retirement age of 65, as of 2016, those who claim it at 60 have their pension reduced by 36%.

Canada also maintains the Registered Retirement Savings Plan, which maintains personal accounts for holding savings and investment assets.

In addition to the public pension system, some employers maintain private pension plans for their employees. Investments into these plans are not subjected to taxation until retirement. Private pension plans are subjected to various regulations among the provinces and territories, and must be registered with the authorities.

Pension regulation in Canada

Pension regulation in Canada falls mostly within provincial jurisdiction by virtue of the property and civil rights power under the Constitution Act, 1867. For workers whose employers are subject to federal jurisdiction, such jurisdiction extends to regulating pension plans available to them.

Pension Benefits Act

The Pension Benefits Act is administered by the Superintendent of Financial Services appointed by the Financial Services Commission of Ontario. Ontario regulates approximately 8,350 employment pension plans, which comprise more than 40 per cent of all registered pension plans in Canada.

It was originally enacted as the Pension Benefits Act, 1965 (S.O. 1965, c. 96), and it was the first statute in any Canadian jurisdiction to regulate pension plans.

Overview:

All pension plans in the province must be registered with the Superintendent

A plan must have an administrator

The administrator has a statutory duty to exercise care, diligence and skill

The plan may be either defined benefit or defined contribution, and appropriate rules are in place to protect the benefits that have accordingly accrued to each member

Rules are in effect to determine the value of benefits that may be transferred or divided for family law purposes

The plan must have sufficient funding to provide the benefits that have been committed under it

Protections are in place in the event of the winding up of a plan, or the underfunding of a plan in the event of the employer’s insolvency

Transfers between plans cannot take place without the Superintendent’s authorization

A guarantee fund is in place for guaranteeing certain benefits provided by plans, and it is funded by all employers providing such plans.

CPP Investment Board

The CPP Investment Board, formally the Canada Pension Plan Investment Board, is a Canadian Crown corporation established by way of the 1997 Canada Pension Plan Investment Board Act, to oversee and invest the funds contributed to and held by the Canada Pension Plan (CPP). As of June 30, 2017, the CPP Investment Board manages over C$326 billion in investment assets for the Canada Pension Plan on behalf of 19 million Canadians.

Features of Pension Plan

Retirement pension
You can apply for and receive a full CPP retirement pension at age 65 or receive it as early as age 60 with a reduction, or as late as age 70 with an increase.

Post-retirement benefit
If you continue to work while receiving your CPP retirement pension, and are under age 70, you can continue to participate in the CPP. Your CPP contributions will go toward post-retirement benefits, which will increase your retirement income.

Disability benefits
If you become severely disabled to the extent that you cannot work at any job on a regular basis, you and your children may receive a monthly benefit.

Survivor’s pension
When you die, a pension may be paid to your surviving spouse

Death benefit
Provides a one-time payment to (or on behalf of) the estate of a deceased CPP contributor.

Children’s benefits
Provide monthly payments to the dependent children of disabled or deceased CPP contributors.

Provisions of CPP

The provisions of the CPP include:

Pension sharing
Married or common-law couples in an ongoing relationship may voluntarily share their CPP retirement pensions.

Credit splitting for divorced or separated couples
The CPP contributions you and your spouse or common-law partner made during the time you lived together can be equally divided after a divorce or separation.

Child rearing provision
If you stopped working or received lower earnings to raise your children, you may be able to use the “child-rearing provision” to increase your CPP benefits.

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