New Planning Opportunities

In last year's Federal Budget, significant changes to Old Age Security (OAS) were announced. Most prominent was the raising of the qualification age for Old Age Security benefits from 65 to 67. Given less attention in the media was the ability, beginning July 1, 2013, for those of you turning age 65 to elect to defer your OAS benefits for up to 5 years. This voluntary deferral provision presents significant planning opportunities; pre-retirees should be aware of these as they approach retirement.

Let's take a look at the OAS changes and how they will impact you. Let's first point out, however, that these changes do not affect those of you who already receive OAS.

OAS is financed from general government revenues and provides a monthly income to Canadians age 65 and over. The maximum monthly benefit for the first quarter of 2013 is $546.07 ($6,553 annually), and is subject to quarterly indexing. In the Economic Action Plan 2012 it was announced that with Canadians living longer and healthier lives, the changes "are necessary to ensure that the OAS program remains on a sustainable path. They will ensure that OAS remains strong and is there for future generations when they need it...". No doubt factoring into the decision was that many other countries, including Australia, USA, and a number of European countries, are increasing the age of eligibility for their public pension programs.

Changes to CPP benefits were introduced in December 2009 and began taking effect in 2011. With the changes to OAS, this is a good time to review the CPP amendments from the last few years.

Here are the CPP changes already in place:

1. If you decide to begin CPP payments prior to age 65 but continue to work, you and your employer will both need to continue contributing to CPP. These contributions are applied to increase your CPP benefits effective January 1 of the year following the contribution.


2. You can now collect CPP benefits immediately after you retire without any work interruption.


3. If you are between the ages of 65 to 70, are receiving CPP benefits, and are still working, then you can choose to contribute to CPP which will increase your pension the following year.


4. If you start your CPP benefits after age 65, your monthly pension will increase by 0.7% per month (8.4% per year). If you wait until age 70 to start collecting CPP benefits, then your monthly amount will be 42% higher than at age 65.


5. If you start your CPP benefits prior to age 65, your monthly pension will decrease by a larger percentage than in the past. These changes are still being phased in and will be completed by 2016. See the chart below for details.