Book 2: Programs and service overview - Seniors and retirement

Official title: ESDC Programs and service delivery overview - Seniors and retirement

On this page

  1. Canada Pension Plan
  2. Old Age Security
  3. Guaranteed Income Supplement
  4. New Horizons for Seniors Program
  5. Canadian Government Annuities

1. Canada Pension Plan

Description

The Canada Pension Plan (CPP) is a statutory program that began operations in 1966. It is the second of the three pillars of Canada’s retirement income system. The first pillar is the Old Age Security program and the third pillar is private savings and investments, which include employer pension plans and registered retirement savings plans.

The CPP is a social insurance plan funded by the contributions of employees, employers and the self-employed and the revenue earned on CPP investments. The Plan covers virtually all employed and self-employed persons working in Canada, excluding Quebec, which operates its own comprehensive plan, the Quebec Pension Plan. The CPP provides contributors and their families with partial income replacement upon retirement, disability or death of a wage earner and, together with OAS, serves to create a modest, stable base upon which to build income in retirement. While the CPP is primarily a retirement plan, it also provides supplementary disability and survivor benefits, which reflect the insurance nature of the Plan and are not a direct return on contributions.

The Canada Pension Plan consists of two components: the base, or original, component, which first began in 1966, and the enhanced component, which began in 2019. These two components work together to provide benefits to Canadians and are part of a single, unified Plan.

Workers aged 18 and over are required to make contributions on earnings between $3,500 and the year’s maximum pensionable earnings (YMPE), set at $57,400 in 2019, which is based on the average industrial wage. Within this range of earnings, the contribution rate is 10.2% (9.9% to the base, or original, CPP and 0.3% to the CPP enhancement) shared equally by employers and employees, who each pay 5.1%. The self-employed pay both portions. The enhancement’s contribution rate will gradually grow to 2% (for a total of 11.9%) by 2023. The enhancement will also increase the range of earnings protected by the Plan by creating a new band of covered earnings starting in 2024. Contributions on earnings above the YMPE up to the new limit (which will be 14% higher in 2025 and thereafter) will be 8.0%, shared between workers and their employers. According to the projections of the Chief Actuary of Canada, this new limit would be $79,400 in 2025 (compared to the standard YMPE of $69,700 in 2025).

The base, or original, CPP retirement pension was designed to replace 25% of a contributor’s average lifetime earnings (up to the annual limit) from age 18 until they begin collecting it. The standard age for the retirement pension is 65, but individuals can receive a permanently reduced pension as early as age 60, or increase the monthly amount by deferring their pension up to age 70. The CPP enhancement will top-up the benefits provided by the base component of the Plan. The enhancement is fully funded, meaning that benefits will grow slowly over time as individuals work and contribute. Each year will result in a partial benefit, with the full effects of enhancement available with 40 years of contributions representing an increase of the CPP’s earnings replacement from one-quarter to one-third (33.33%). Together, the higher earnings threshold and replacement will increase the maximum CPP retirement pension by more than 50%. The enhancement will also increase the CPP’s survivor and disability pensions and the post-retirement benefit.

Within Employment and Social Development Canada, Service Canada is the Government of Canada’s one-stop service delivery network. Canadians can use the online My Service Canada Account to apply for a CPP retirement pension. In 2017 to 2018, approximately 81,000 people, representing 27% of all applications, applied for their CPP retirement pension online. As of 2020, to ensure Canadian workers receive the full value of their pension, Service Canada will be enrolling CPP contributors who are 70 years old. The Old Age Security Act was amended to decrease the age of eligibility for the OAS pension and the Guaranteed Income Supplement from 67 to 65, and for the Allowances from 62 to 60.

Canada has entered into social security agreements with other countries to help people who have lived and worked in Canada and abroad to qualify for OAS and CPP benefits and pension benefits from partner countries that provide for retirement, old age, disability and survivorship. These social security agreements enable Canadian companies and their employees who are sent to work temporarily outside of Canada to continue to contribute to the CPP and eliminate the need to contribute to the social security program of the other country for the same work. Canada has concluded social security agreements with 60 countries, of which 59 are currently in force (see Annex A). Negotiations with other countries towards social security agreements are ongoing.

Key program statistics

In 2017 to 2018, 5.8 million CPP beneficiaries were paid, representing a total annual benefit value of $44.5 billion of which:

Policy lead: Co-lead by Income Security and Social Development Branch and Finance Canada

Stewardship of the CPP is shared between the federal and provincial governments. Major changes to the Plan require the formal approval of two-thirds of provinces containing two-thirds of the population.

Federal and provincial finance ministers review the Plan every three years via the Triennial Review. The review considers the Plan’s financial state and seeks to ensure that the Plan and its benefits remain relevant to meet the changing needs of Canadians. Finance Canada leads this process, supported by Employment and Social Development Canada (ESDC).

Service delivered by: Benefit Delivery Services Branch and Transformation and Integrated Service Management Branch

List of key stakeholders

ESDC is responsible for oversight, program policy and benefit delivery of the CPP. Other partners have responsibilities as follows:

2. Old Age Security

Description

The Old Age Security (OAS) program is the first of three pillars of Canada’s retirement income system. The second pillar is the Canada Pension Plan, while the third pillar consists of private measures, such as employer-sponsored pension plans, personal registered retirement savings plans and tax-free savings accounts. The OAS program is a statutory program, which began operations in 1952 following the passage of the Old Age Security Act. It is a non-contributory, residence-based program financed through general government revenues. Its objective is to provide a minimum level of income to seniors and contribute to their income replacement in retirement.

The OAS program is administered by Employment and Social Development Canada. Service Canada delivers the program to clients via a network of regional processing centres and call centres located across the country.

The benefits payable under the OAS program include the OAS pension, which is provided to all individuals aged 65 and older who meet the legal status and residence requirements, the Guaranteed Income Supplement (GIS) for low-income seniors, and the Allowances for low-income Canadians aged 60 to 64 who are the spouses or common-law partners of GIS recipients, or who are widows or widowers.

The OAS pension is paid in recognition of a senior’s contribution to Canadian society, the economy and their community. Seniors who have resided in Canada for at least 40 years after age 18 are entitled to receive a full OAS pension of $607.46 per month for the July to September 2019 period ($7,289.52 per year). A partial pension is paid to individuals who have resided in Canada for at least 10 years after age 18. The partial pension is paid at the rate of 1/40th of the full amount for each year of residence in Canada after age 18.

Canada has entered into social security agreements with other countries to help people with less than 10 years of residence in Canada, who have lived and worked abroad, to qualify for the OAS pension. Canada has concluded social security agreements with 60 countries, of which 59 are currently in force. Negotiations towards social security agreements are ongoing with many other countries (see Annex A).

In addition, the GIS provides additional income to seniors who have little or no income other than the OAS pension. The benefit amount is based on the applicant’s annual income or, in the case of a couple, their combined income. Seniors with no income other than the OAS pension receive the maximum GIS. As of July 2019, the maximum GIS amounts to $907.30 per month ($10,887.60 per year) for single seniors and $546.17 per month ($6,554.04 per year) for each member of a couple.

The two other income-tested benefits within the OAS program are the Allowance and the Allowance for the Survivor. The Allowance is designed to recognize the difficult circumstances faced by low-income couples living on only one pension until the other spouse/partner becomes eligible for the OAS pension and the GIS at age 65. Similarly, the Allowance for the Survivor is intended to assist 60 to 64-year-old widows or widowers who are facing financial difficulties following the death of their spouse or common-law partner and who remain unattached. As of July 2019, the maximum benefit amount is $1,153.63 per month ($13,843.56 per year) for the Allowance and $1,375.17 ($16,502.04 per year) for the Allowance for the Survivor.

Key program statistics

In 2017 to 2018, $50.6 billion in benefits were provided to 6.1 million beneficiaries. According to the Chief Actuary, the number of OAS pensioners is expected to increase to 9.3 million in 2030, with total expenditures reaching $105 billion.

Policy lead: Income Security and Social Development Branch

Service delivered by: Benefit Delivery Services Branch and Transformation and Integrated Service Management Branch

Annex A - Canada’s social security agreements

Canada has concluded social security agreements with the following 60 countries, of which 59 are in force (date of entry into force in parentheses):

* Signed but not yet in force

~ Limited coverage only agreement

+ The original social security agreement has been replaced or amended by a supplementary agreement or by a protocol. The date of entry into force of the original social security is included in parentheses.

3. Guaranteed Income Supplement

Description

The Guaranteed Income Supplement (GIS) is a component of the Old Age Security (OAS) program, which is legislated under the Old Age Security Act. The GIS is an income-tested benefit paid to OAS pensioners who receive little or no income other than the OAS pension. It is intended to provide a basic level of income protection to help seniors provide for their immediate needs.

The benefit amount is based on the applicant’s annual income or, in the case of a couple, their combined income. Seniors with no income other than the OAS pension receive the maximum GIS. For the July to September 2019 period, the maximum GIS amounts to $907.30 per month ($10,887.60 per year) for single seniors and $546.17 per month ($6,554.04 per year) for each member of a couple.

The GIS is reduced by $1 for every $2 of net income earned by a recipient as stipulated in the Income Tax Act. As of July 2019, the GIS is phased out at an annual income level of $18,408 for single seniors and at a combined income level of $24,336 for senior couples. Calculating the GIS based on income allows the benefit to be targeted to those seniors most in need. All sources of income are taken into account in assessing eligibility for the GIS, with a few exceptions, such as the first $3,500 of employment income. In July 2020, this earnings exemption will be enhanced to extend eligibility to self-employment income and provide a full exemption on up to $5,000 of annual earnings, as well as a 50% exemption on the next $10,000 of earnings.

Key program statistics

In 2017 to 2018, 1.9 million seniors received the GIS, at an estimated cost of $11.7 billion.

Policy lead: Income Security and Social Development Branch

Service delivered by: Benefit Delivery Services Branch and Transformation and Integrated Service Management Branch

4. New Horizons for Seniors Program

Description

The New Horizons for Seniors Program (NHSP) is a federal grants and contributions program that focuses on enhancing the quality of life and the social participation of seniors within their communities. It funds projects that engage seniors and enable them to make valuable contributions in their communities by sharing their knowledge, skills and experience. The Program has five main objectives which include: promoting volunteerism among seniors and other generations; engaging seniors in the community through the mentoring of others; expanding awareness of elder abuse, including financial abuse; supporting the social participation and inclusion of seniors; and providing capital assistance for new and existing community projects and/or programs for seniors.

The NHSP is structured with two complementary streams, community-based and pan-Canadian. The community-based stream supports a high volume of small projects (up to $25,000 grants for a period of one year) in communities across the country. This stream funds projects that are led or inspired by seniors and that focus on at least one of the Program’s five objectives. The pan-Canadian stream funds a small number of collective impact projects in communities across the country with a funding period of up to five years and maximum funding of $5 million. The pan-Canadian stream projects focus on complex issues facing seniors, using innovative interventions in communities and regions across Canada.

The NHSP is delivered in Quebec under a formal Canada-Quebec Protocol of Agreement. Its joint project selection process ensures that the NHSP funds activities that align with priorities that both governments share and that complement Government of Quebec initiatives.

The NHSP is administered under the Department of Employment and Social Development Act.

Key program statistics

Since its introduction in 2004, the NHSP has funded close to 23,600 community-based projects in hundreds of communities across Canada. Approximately 2,000 community-based projects were funded under the 2018 Call for Proposals.

The pan-Canadian stream, which was introduced in 2007, has funded 123 projects across Canada. As a result of the 2018 to 2019 Call for Concepts, 22 more projects will be funded.

The NHSP is a grants and contributions program (Vote 5) that has an ongoing funding budget of $70 million per year, including a $20 million increase in 2019.

Policy lead: Income Security and Social Development Branch

Service delivered by: Program Operations Branch

List of key stakeholders

Key stakeholder groups include: (1) numerous organizations serving seniors across Canada; (2) the Public Health Agency of Canada; (3) the LGBTQ2 Secretariat of the Privy Council Office; (4) provincial and territorial departments responsible for seniors; and (5) the Fédération des aînées et aînés francophones du Canada.

5. Canadian Government Annuities

Description

The Canadian Government Annuities Act of 1908 was one of the earliest significant pieces of social legislation in Canada. Its purpose was to encourage Canadians to prepare financially for their retirement. Government annuities were purchased either by individuals or by employers as pension plans for their employees. An annuity is an amount payable at regular intervals (that is monthly, quarterly or yearly) to an annuitant beginning on a specified maturity date. The amount of annuity received after maturity is based on the contributions made (premiums paid) during the deferred period.

By the 1960s, other social benefit plans, such as Old Age Security (OAS) and the Canada Pension Plan, were introduced and began gaining importance in providing Canadians with basic retirement income. The Government's recognition that retired Canadians could now be served by other social security programs as well as the private sector brought about the decision to disband the annuities sales force. In 1975, an Act of Parliament formally ended the sale of government annuities. Employers, however, could register new employees under group contracts until 1979. Government annuities are not sponsored by the Government, meaning the Government has no fiduciary liability. Its responsibilities are limited to providing and securing benefits in accordance with each contract's provisions.

Although it is not possible to purchase a government annuity today, Employment and Social Development Canada/Service Canada still administers annuities currently under payment, and those that will become payable at a later time, on behalf of clients from across Canada and around the world. The assets and liabilities are shown in the Public Accounts of Canada.

There are approximately 27,000 clients ranging in age from 40 to over 100 receiving close to $20 million annually in annuities administered by Employment and Social Development Canada/Service Canada. Approximately 180 clients have contracts that have not yet matured. The last contract will reach maturity in 2032.

Policy lead: Service Canada, Atlantic Region

Service delivered by: Service Canada, Atlantic Region

List of key stakeholders

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