When Canada Pension Plan Retirement Benefits are Just Not Enough

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BY FAZAAD BACCHUS 

The Canada Pension Plan (CPP) is a Government run program funded by mandatory contributions made by everyday workers like you and me. Currently contributions are generally 4.95% of your income and for those who are self employed it’s 9.9% of your net business income. Of course there are more stipulations for contribution like the year’s basics exemption (YBE) and the year’s maximum pensionable earnings, but for the purpose of this discussion we will focus on those all ready in retirement and therefore no longer contributing.

The amount that you will expect to receive is based on the amount of contributions you made over the years and for how long you made them. Generally, Income Security Programs office will send a periodic statement showing your accumulation and this will give you an idea of what to expect.  Normal retirement age is sixty five to start receiving your pension however you can start receiving your CPP from as early as age sixty or defer until age seventy. Both have disadvantages and advantages. If you start earlier, it is a reduced amount, but payable for a longer period and if you start later it’s a higher amount, but payable for a shorter period. The decision is not an easy one to make as it includes other factors such as your health and expected life span.

The maximum monthly CPP retirement benefit for 2016 nonetheless is $1092.50

While this is the maximum, there are many who will not qualify for it, especially immigrants who have not had the full amount of years here. To be eligible for the maximum one has to have a solid employment record and have contributed also at the highest levels. Typically I see many persons falling somewhere around $500.00 to $700.00 per month. So if you are in retirement and you are receiving CPP, it might just not be enough to make ends meet. If you are between the ages of sixty and sixty five, as we say in the Caribbean “hold strain”, when you have attained the age of sixty five and have lived for at least ten years in Canada, you are eligible to apply for OAS pension. This is a non contributory social assistance program from the tax revenues of the Federal Government. This means you are entitled to an amount of OAS pension without having to have made a contribution towards it.

The maximum OAS monthly pension for 2016 is $570.52

If you are able to qualify for both at the maximum levels then you are already in receipt of $1663.02. But as we discussed earlier there are many who will not qualify at this level. So what is the next benefit that you can look out for? Your final benefit as an individual is the Guaranteed Income Supplement (GIS). This is not an automatic benefit, it must be applied for.

The maximum GIS monthly amount for 2016 is $773.60

However this GIS pension has a claw back threshold, meaning that if you are earning other forms of income e.g. rental income, employment income, RRSP income, or any income you earn will be used to reduce the availability/eligibility of the GIS. In aggregate if your total income for 2015 was less than $17,304 then you are eligible to apply for the GIS.

If the above still does not work for you, and your income needs are more that the total benefits payable then you may consider using a reverse mortgage. This facility is especially useful to individuals who do not have any heirs that they wish to leave anything to and would be better off spending the equity in their property.

The above article is only a guide as each individual is different with differing circumstances. Therefore to maximize the benefits available to you, kindly consult with a Financial Advisor or drop me a line if you need some assistance.

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