social development canada income security programs social development canada

SOCIAL DEVELOPMENT CANADA

Income Security Programs



Income Security Programs

• Old Age Security (OAS)

• Canada Pension Plan (CPP)

• International SocialSecurity Agreements

• 1 800 277-9914

• www.sdc-dsc.gc.ca/isp



The 3 levels of Canada’s Retirement

Income System3 Private Savings

Employer Pensions

2 Canada Pension Plan Québec Pension Plan

1 Old Age Security


Canada’s Retirement Income System

• In general, 70% of pre-retirement income is required

• OAS and CPP retirement pensions are designed to replace about 40% of thepre-retirement income


Canada’s Retirement Income System

• On average, 70% of pre-retirement income is required to maintain pre- retirement lifestyle

• The OAS pension and CPP Retirement pension are designed to replace about 40% of the average pre-retirement income

• Maximum OAS and CPP retirement benefits in year 2006 is about $16,000


Old Age Security Sustainability

• Financed from general tax revenues of the Government of Canada

• OAS on solid ground - Actuarial studies

• Canada’s Gross Domestic Product (GDP) and individual incomes to rise


Old Age Security Benefits

• Old Age Security pension (OAS)

• Guaranteed Income Supplement (GIS)

• Allowance

• Allowance for the Survivor


Old Age Security (OAS) Pension

• Based on age, legal status, and years of residence in Canada

• 2 types of pension - Full and Partial• Taxable• May be subject to OAS Repayment of

Benefits


OAS Pension Must:• be 65 years of

age or more;• meet the legal

status andresidencerequirements;

• apply in writing


OAS PensionLegal Status Requirement

Must be:

• a Canadian citizen; or• a legal resident of Canada; on

the day preceding the approval of your application or on the day before the day you stopped living in Canada.


OAS Residency Requirement

People living in Canada

• Must be a Canadian citizen or a legal resident at the time your application is approved

• Must have resided in Canada for at least 10 years after the age of 18


OAS Residency Requirements

People living outside of Canada• Must have been a Canadian citizen or

a legal resident of Canada when you left Canada

• Must have resided in Canada for at least 20 years after the age of 18


Full OAS Pension Must:• have resided in Canada for at least

40 years after age 18 and before your application is approved; or

• meet the 10 years residence rule; or• meet the “3 for 1” residence rule.


Full OAS Pension “3 for 1” Residence Rule

Example:55 6518

Need 3 years ofresidence

For each year ofabsence

64


Partial OAS Pension • You do not qualify for a full OAS pension• 1/40th of a full OAS pension for each full

year of residence in Canada after age 18• Minimum of 10 years residence

required• Once approved, a partial OAS pension

will not be increased following additional years of residence in Canada


PortabilityTo have the OAS pension

paid outside Canada, you must:

• have 20 years of residence in Canada after age 18; or

• meet the 20-yearresidence throughone of Canada’sInternationalAgreements withanother country.


OAS Repayment of Benefits • OAS pension higher-income pensioners• Net World Income from $62,144 to $100,914

(2006)• 15% for residents, varies for non-residents• Based on previous year’s income

(continued…)


Guaranteed Income Supplement (GIS)

• For low-income seniors

• Added to the OAS pension

• Based on income and marital status

• Based on combined income, if the applicant has a spouse/partner

• Not taxable


GIS

Must:

• be in receipt of an OAS pension;

• reside in Canada;

• apply in writing.


Allowance

• For low-income seniors who meet the eligibility conditions

• Based on combined income from the previous year

• Not taxable

• Must apply in writing


AllowanceMust be:• between the ages of 60 and 64;• the spouse/common-law

partner of a GIS recipient;• a Canadian citizen

or a legal resident(same as OAS);

• a resident of Canadafor at least 10 yearsafter age 18


Allowance for the Survivor • For low-income seniors who meet the

eligibility conditions• Based on previous year’s income• Not taxable



Allowance for the Survivor Must be:• between the ages of 60

and 64;• a survivor;• a Canadian citizen or legal

resident (same as OAS);

• a resident of Canada for at

least 10 years after age 18.


Allowance and Allowance for the Survivor at age 65:

• At age 65, the Allowance and Allowance for the Survivor stops, must apply for OAS Pension

• May also qualify for the GIS


Maximum Net Income AllowedJan to March 2006GIS – Single $ 14,256 Table 1

GIS Married - Spouse/Partner is: • an OAS pensioner (65+) $ 18,720 Table 2

• a Non-pensioner (under 60) $ 34,368 Table 3

• an Allowance pensioner (60-64) $ 34,368 Table 4

Allowance $ 26,496 Table 4

Allowance for the Survivor $ 19,368 Table 5

(widow/widower 60-64)

NOT INCLUDING OLD AGE SECURITY!


Portability

GIS, Allowance andAllowance for theSurvivor may only be paid outside of Canada for the month of your departure and for the following six months


Renewal

• GIS, Allowance and Allowance for the Survivor must be renewed each year

• They are renewed automatically if you file your income tax return prior toApril 30

(continued…)


Canada Pension Plan• Began in January 1966

• Employment-based contributions

• Self-supporting

• Payable outside Canada

• Reviewed and revised regularly

• Québec has a program with

similar benefits


CPP Investment Board

• Professionally manages the CPP fund, not needed to pay benefits

• Broadly subject to the same investment rules as other pension funds

• Reports its investments and returns regularly

www.cppib.ca


Contributions for Year 2006

Maximum Contributory Earnings:$42,100 (YMPE) - $3,500 (YBE) = $38,600

Employee Rate: 4.95%

Amount: $1,831.50

Employer Rate: 4.95%

Amount: $1,831.50

Self-Employed Rate: 9.9%

Amount: $3,663


Contribution Rates Schedule

Year Employee Employer Self-Employed

2000 3.9% 3.9% 7.8%

2001 4.3% 4.3% 8.6%

2002 4.7% 4.7% 9.4%

2003 4.95% 4.95% 9.9%

2006 4.95% 4.95% 9.9%

(Contribution Rate will now be maintained at this

maximum rate of 9.9%)


Adjusted Earnings• Protects pension by

taking growth of wages into account


Contributory Period

Starts (later of):

• January 1966; or

• month after your 18th birthday.


Contributory Period

Ends (first of):

• month before your Retirement pension starts; or

• month you reach age 70; or• month you die; or• when eligible for Disability benefits.


Contributory Period Example

Starts (later of): • January 1966; or• age 18

Ends (first of):• retirement; or• age 70; or • death

Age 65Age 60 Age 70

(Flexible start date option)

Start


Canada Pension Plan

Statement of Contributions

• Sent periodically• 1 877 454-4051


Drop-Out Provisions

• Periods of CPP Disability• Periods during which children

were raised up to age 7• Plus 65 years of age• 15% of the lowest earning years

in your contributory period (calculated last on remaining years)


Drop-Out ProvisionsExample:

Year 2005Age 65

Contributory Period40 Years

23 years after drop-outs(approximate only as calculation actually uses months)

1. Periods of disability (1985 to 1990) 6 Years2. Raising children (1968 to 1974) 7 Years3. 15% (39 - 13 = 26 years x 15%) 4 Years

1968 - 1974 1977 - 1978 1985 - 1990 1982-1983


Child Rearing Drop-Out

Must have:

• a child born after December 31, 1958;

• left or reduced work to care for the child while under the age of 7;

• received the FamilyAllowances; or

• been eligible for theChild Tax Benefit.

Must apply in writing


Credit Splitting

• “Credits” may be divided upon divorce, legal annulment or separation of spouses or common-law partners

• “Credits” may create eligibility or increase/ decrease entitlement toCPP benefits

• Applicant’s ex-spouse/ex-partner is notified ofthe request in writing


Canada Pension Plan Benefits• Retirement pension

• Disability benefit Disabled Contributor Child’s benefit

• Survivor benefits Death benefit Survivor’s benefit Surviving Child’s benefit


Retirement Pension

May start receiving theRetirement pension:

between age 60 and 65;

at age 65; between age 65 and 70.

• Must have made at least one valid contribution

• Must apply in writing• Taxable


Flexible Retirement Pension

Between 60 and 65:• Amount decreased by 0.5% for

each month under age 65• Maximum decrease of 30%• No re-adjustment of pension

amount at age 65

(continued…)



Between 60 and 65• No retroactivity

• Stop or earn up to a maximum amount for period of time

• Stops contributing to CPP/QPP


Substantially Ceased WorkingCessation Test For Early Retirement

• Earnings from employment must be below the maximum monthly CPP Retirement pension

• Only for the month before the Retirement pension starts and for the month the pension starts being paid

• Max. of $844.58 for each month (2006)



Between 65 and 70• Increased by 0.5% for each

month over age 65

• Maximum increase of 30%

• Retroactivity of maximum of 11 months prior to application (back to age 65 only)

• Cannot contribute after age 70


Sharing Your Retirement Pension

Sharing your Retirement pension withyour spouse or common-law partner.


Canada Pension Plan Disability Benefit

Number of beneficiaries

(2002/2003): 285,000

Max. monthly basic benefit (2006): $1,031.05

Total expenditure

(2002/2003): $ 2.8 B


Disability Benefit

• Under age 65• Paid contributions for

the minimumqualifying period

• Disability both severe and prolonged



Minimum Qualifying Period

Applicants disabled after January 1, 1998• 4 of last 6 years in the contributory period

• 4 years, if there is less than 6 years in the contributory period

(continued…)


Minimum Qualifying Period

Applicants disabled after January 1, 1998

Earnings must be at least 10% of YMPE (Disability Basic Exemption - DBE) rounded down to nearest $100

YMPE for 2006 is $42,100

DBE for 2005 is $4,200


Minimum Qualifying PeriodApplicants considered disabled

before 1998• 5 of last 10 years; or• 5 years, if less than 10 years in the

contributory period; or• 2 of last 3 years; or• 2 years, if only 2 years in the

contributory period.


Disability Benefit

Severe and ProlongedSevere:• condition prevents from

doing any type of work on a regular basis.

Prolonged:• condition is long term or

may result in death.


Disability Benefit

Eligibility Provisions for Late Applicants

• Protects eligible applicants who are late applying

• Must meet the minimum qualifying period at time considered disabled

• Up to 12 months retroactive payments


Disability Benefit

Vocational Rehabilitation• Vocational Rehabilitation Program is

designed to help recipients of CPP Disability benefits return to work

• Started in 1995• Voluntary


Disability Benefit

Vocational Rehabilitation

• Motivated toreturn to work

• Doctor agrees • Signs a consent

to participate


Disability Benefit at Age 65

• At age 65, the Disability benefit is replaced by the CPP Retirement pension


Canada Pension PlanCanada Pension Plan

Survivor BenefitsSurvivor Benefits


Survivor Benefits

Minimum Contribution Required• Deceased contributor must have paid

into CPP for 1/3 of their contributory period or

• 10 years (whichever is less)and

• have a minimum of 3 years of contributions


Canada Pension Plan

Death Benefit

Max. lump sum benefit (2006): $2,500

Total expenditure (2002/2003): $234 M


Death Benefit

• Paid to the representative of the estate

• If there is no estate,the benefit is paid to:

1) person or agency responsible for the funeral expenses;

2) survivor (spouse or common-law partner);

3) next-of-kin.


Canada Pension Plan

Survivor’s Benefit

Number of beneficiaries

(2002/ 2003): 907,000

Max. monthly benefit (2006): $471.85 (-65)

$506.75 (+65)

Total expenditure (2002/2003): $3.1 B


Survivor’s Benefit

• Paid to the survivor of the deceased contributor• Survivor must be over

age 35, or have adependent child,or be disabled

• Benefit continues uponchange in marital status

• Up to 12 monthsretroactive payments

• Taxable• Must apply in writing


Canada Pension Plan

Combined Benefits

Combined benefits

Retirement pensionor Disability benefit Survivor’s benefit


Canada Pension Plan

Child’s BenefitNumber of beneficiaries (2002/2003):

Disabled Contributor Child’s benefit 90,000

Surviving Child’s benefit 86,000

Flat-rate monthly benefit (2004): $200.47

Total expenditure (2002/2003): 461 M


Child’s Benefit

• Dependent child of a deceased or disabled contributor

• Maximum oftwo benefitsmay be paidper child

• Taxable• Must apply in writing


Full Time Attendance at School

• Acceptable educational institution• Benefits paid during vacation

period• Must confirm

attendance eachyear/semester

• May be deemedin school, ifabsence is dueto illness


International AgreementsAntigua and Barbuda

Australia

Austria

Barbados

Belgium

Chile

Croatia

Cyprus

Czech Republic

Denmark

Dominica

Finland

France

Germany

Greece

Grenada

Hungary

Iceland

Ireland

Israel ●

Italy

Jamaica

Jersey and Guernsey

Korea

Luxembourg

Malta

Mexico

Morocco ×

Netherlands

New Zealand

Norway

Japan

× Not yet in force

Philippines

Portugal

St. Kitts and Nevis

Saint Lucia

Saint Vincent and the

Grenadines

Slovakia

Slovenia

Spain

Sweden

Switzerland

Trinidad and Tobago

Turkey ×

United Kingdom ●

United States

Uruguay

● Limited agreement


• Reconsideration

• Review Tribunal

• Pension AppealsBoard


Direct Deposit

• Bank, Credit Union or Financial Institution

• 81% of ISP clients receive their monthly payment through direct deposit


Start Planning Today

Things to do now!• Social Insurance Number

• Birth certificate

• Marriage certificate

• Citizenship certificate

• Immigration/legal status

• Passport

• Will

• Statement of Contributions


How to reach us ?

1 800 277-9914 (English)

1 800 277-9915 (French)

1 800 255-4786

(TDD/TTY device)

www.sdc-dsc.gc.ca/isp

social development canada income security programs social development canada

Documents

government of canada

legal resident of canada

old age security slide

preretirement income

years of age

survivor slide

writing slide

pre retirement income