Pension programs administered by the governments of Canada and Alberta are designed to provide a certain level of income security for Canadians over sixty-five years of age.
Old Age Security Pension: How Do I Qualify?
To be eligible for the Old Age Security Pension you must be at least sixty-five years of age, have Canadian legal residence status (which is usually established by being a Canadian citizen, a permanent resident, or by having a visitor’s permit) and meet residency requirements. If you have lived in Canada for periods totaling forty years since your eighteenth birthday or if you do not live in Canada but have lived in Canada for at least twenty years since your eighteenth birthday, you will qualify for an Old Age Security Pension. If you do not meet these requirements, you may still qualify for a partial Old Age Security Pension.
A minimum of ten years’ residence in Canada after the age of eighteen is required in order to receive the Old Age Security (OAS) benefits while you are living in Canada. The amount of the benefit will vary depending upon how long you have lived in Canada. For example, if you have lived in Canada for at least forty years since turning age eighteen, you will qualify for the full amount of the OAS benefit. You can also qualify for the full benefit if you were twenty-five or older on July 1, 1977, have been living in Canada for ten years just prior to applying for OAS and meet one of the following three additional requirem ents:
You lived in Canada on July 1, 1977;
You lived in Canada before July 1, 1977, after having turned eighteen;
You possessed a valid immigration visa on July 1, 1977.
If you do not qualify for the full benefit you may still qualify for a partial benefit. As this pension is not automatically paid to you when you reach sixty-five, you should apply for your Old Age Security Pension six months before your sixty-fifth birthday. Application forms are available from post offices or Government of Canada Income Security Offices. Proof of age is required. Someone can make an application on your behalf if you are unable to apply due to illness or disability.
Once your OAS benefit has been approved, you may continue to receive it even if you move outside of Canada so long as you have been living in Canada for at least twenty years after your eighteenth birthday. If this is not the case, your benefits would continue for only six months after you move.
How Much Will I Receive?
A standard amount is paid monthly to all recipients of the Old Age Security Pension. These benefits are adjusted every three months to reflect increases in the cost of living. As of April 2011, the maximum benefit is $526.85 per month.
Old Age Security benefits are subject to income tax. Individuals with an income of, in 2011, $67,668.00 or more per year will be subject to a clawback by the government of the OAS benefits. The annual OAS benefit will be reduced by 15% of the excess income over $67,668.00, up to the maximum of the total OAS benefit. If your income exceeds $109,764.00, for 2011, the full amount of the OAS benefit would be clawed back by the government.
Guaranteed Income Supplement and Allowance: How Do I Qualify?
If your income, other than the Old Age Security Pension, is limited you may be qualified to receive a supplemental monthly payment called the Guaranteed Income Supplement (GIS) in addition to your Old Age Security Pension benefit. Your eligibility depends upon marital status and total income (aside from OAS). The maximum amount for a single person (which includes a widowed, separated, divorced, unmarried homemaker, or someone who is married to a non-recipient), who has no income other than the Old Age Pension, is currently $665.00 per month as of April 2011, (GIS only, not including OAS). The maximum is $439.13 per month for a recipient who is married to another recipient. If you are single and your annual income is $15,960.00 you will receive the GIS. If you are married or living common law and your partner is not receiving OAS and your combined annual income is $38,256.00 you will receive GIS. If you are married or living common law and both of you receive OAS, and have a combined income under $21,120.00 (exclusive of your OAS) you will receive the GIS. You must apply for GIS, and it is based upon your income as reflected by your tax return for the previous year. It will be automatically adjusted yearly based upon receipt of your tax return. You do not pay tax on the GIS.
In addition to the GIS, there is a further benefit called an Allowance. This benefit is paid to the spouse, widow, or widower of an OAS recipient whose annual income is below $29,568.00 (married applicant/combined income of applicant and spouse) or $21,504.00 (widowed applicants). You must be between sixty and sixty-four years old and have lived in Canada for at least ten years after turning eighteen to qualify for the Allowance. The Allowance stops once you turn age sixty-five and you become eligible for basic OAS. The maximum Allowance is $965.58 per month for the spouse of an OAS recipient. For a widow or widower of a deceased OAS recipient it is $1,070.78 per month.
Does the Government of Alberta Provide a Supplement?
The Alberta Government runs the Alberta Seniors Benefit Program which assists lower income seniors. It provides monthly cash benefits for eligible seniors. Seniors who reside in long-term care and are eligible to receive an Alberta Seniors Benefit cash benefit will be eligible for a Supplementary Accommodation Benefit (SAB). The annual maximum SAB benefit is $4,455 ($371.25 per month). You have to qualify for this program. For further information, contact Alberta Family and Social Services.
If you are refused benefits your case can be reviewed by the Citizen’s Appeal Panel.
Canada Pension Plan
The Canada Pension Plan is a plan operating in all parts of Canada (except Quebec, which has its own pension plan that is similar to and closely tied to the Canada Pension Plan). The plan is a contributory type; you make payments through mandatory deductions from your paycheque.
Pensions from these plans are based on an individual’s earnings. Anyone who is in the paid labour force and earns more than $3,500 in the year must participate in one of these plans. Employees contribute 4.95% of their salary up to a maximum of $2,217.60 per year (in 2011). Employers also pay an equal amount.
You contribute to the Canada Pension Plan on most types of employment income earned between the ages of eighteen and seventy. Your employer will deduct premiums from your salary, match those contributions, and send the entire amount to the federal government. If you are self-employed, you must also contribute. Self-employed persons can contribute a maximum of $4,435.20 per year. Contact Canada Customs and Revenue Agency for further information.
Since there is a minimum number of years for which you must have contributed in order to be eligible for benefits, those who will be in the paid work force only periodically during their adult lives should make other provisions for their retirement. Your Canada Pension Plan account follows you from job to job, regardless of how long you work at each job or how long you may be out of the paid labour force between jobs. At age sixty-five, the pension you receive amounts to approximately 25% of your lifetime average earnings.
Can I Contribute to Canada Pension Plan if I Leave the Work Force to Raise Children?
No. As the law exists now, there is no provision for a person who works within the home to contribute to the Canada Pension Plan. Since the amount ultimately paid to the spouse of a contributor is only a percentage of the benefits payable to the contributor, it is best to plan for your own retirement by starting an RRSP or similar plan until the law changes.
What Happens to Canada Pension Plan Credits Upon Termination of Marriages, and Termination of Common-Law and Same-Sex Relationships?
If you have recently obtained a divorce or annulment or separated from a same-sex or opposite-sex legal or common-law spouse, you or your former partner may apply to have Canada Pension Plan credits earned during the relationship divided equally between the two of you. In other words, you can receive half the pension plan credits your spouse or partner accumulated during your marriage and he or she will receive half of yours.
The following criteria for division of the credits vary depending upon the date of separation or divorce and the type of relationship:
January 1, 1978 to December 31, 1986—(credit splitting did not exist before January 1, 1978) If the marriage ended in divorce or annulment, credit splitting could take place if you had lived together for three consecutive years and applied for credit splitting within three years of the date of marriage ending.
After January 1, 1987, if the marriage ended in divorce or annulment, credit splitting could take place if you had lived together for at least one year continuously, with no time limit to split the credits. If you separated and are not divorced yet, you must have lived together continuously for one year and have separated one year. There is no time limit to apply for division of credits. This also applies to common-law separations; however the time limit to apply for credit splitting is four years.
After July 31, 2000, splitting pension credits was extended to persons in same-sex relationships. Credits could be split after one year of separation if the application was made within four years of separation. You do not have to split your CPP credits upon marriage or other relationship breakdown in Alberta. You can opt out of the pension credit splitting provisions of the CPP by agreement with your spouse or partner.
What Benefits Are Payable Under the Canada Pension Plan?
Pension benefits paid under the Canada Pension Plan are in the form of a retirement pension or Survivor’s benefits. Disability benefits are also available for contributors who become disabled and their dependent children. There is a child-rearing drop-out provision that gives coverage to women who leave the work force temporarily to take care of their young children. This dropout provision is of little or no benefit to women who spend most of their lives working at home or do not return to the work force.
Retirement Pension: How Do I Qualify?
You may apply to receive a retirement pension as early as age sixty if you have made contributions to the Canada Pension Plan in at least one calendar year. Age sixty-five is the earliest age you will receive full benefits. However, you can apply for a reduced pension any time between the ages sixty and sixty-five. Payments are reduced by 0.5% each month you take your pension before your sixty-fifth birthday or you may contribute to the Canada Pension Plan until you reach age seventy when you should make application as you cannot make further contributions. The staff at your nearest Income Security Programs Office will assist you in making the choice that best suits your particular situation, but you should be sure to discuss this in advance of your sixtieth birthday. If you fail to do so, it could result in a loss of benefits.
How Much Will I Receive?
The amount of your retirement pension will be calculated by a formula, which is based on the number of years worked, and your total earnings while employed. Any credits for child-rearing, drop-out provision and pension plan credit splitting will be calculated as well.
Survivor’s Benefits: How Do I Qualify?
If the contributor to the Canada Pension Plan was married or living with someone in a conjugal relationship, the person who, at the time of death, is the legal spouse or common-law partner of the deceased and the children may be eligible for survivor’s benefits. If you are a separated legal spouse and there is no cohabiting common-law partner, you may qualify for this benefit. These benefits are paid monthly. The contributor must have made contributions to the plan for at least three years after her/his eighteenth birthday. Application should be made as soon as possible after the death of the contributor. Contact the Government of Canada Income Security Office for more information. Delay could result in loss of benefits.
Alberta Widow’s Pension Program
The Alberta Widow’s Pension Program provides assistance to widows and widowers of limited income who are between age fifty-five and sixty-four. The program provides premium-free Blue Cross, extended benefits, eye exams every two years, and shelter benefits. There is no similar assistance available for single, separated, or divorced women between the ages of fifty-five and sixty-four.
How Do I Apply?
To apply you will need a completed and signed application form, certified copy of your birth certificate, certified copy of your marriage certificate and a certified copy of your spouse’s death certificate. If you were not born in Canada you must be a nonsponsored immigrant and you must provide a citizenship certificate or proof that Alberta is your permanent residence. You must also include a copy of your income tax return for the year prior to your application and any other financial information requested. You must apply every year to obtain this benefit. Once you are eligible, a form will be mailed to you each year around the time of your birthday. You may receive these benefits until you remarry, move out of the province, or turn age sixty-five. For more information, contact Alberta Family and Social Services.
Other Pension Plans
The various levels of government and most large businesses and institutions offer their employees a registered pension plan as a part of an employment benefits package. In some cases, they also offer non-registered or supplemental pension benefits as well. If either you or your partner is a participant in any such plan, you should familiarize yourself with the details of your particular plan. The employer will fund a minimum of one-half the cost of a defined benefit pension benefit that has been accrued by an employee (the value of which is based on a fixed formula that usually involves a percentage calculation based on years of service while a member of the plan and final average earnings), or in a defined contribution pension plan, the employer will match the contributions made by the employee.
Once the pension has vested after a certain number of years of service by the employee, the employee becomesentitled to receive the full value of the pension benefit accrued under the defined benefit arrangement (and the employer must fund it) or the full value of the account balance, in the defined contribution arrangement, including both employee and employer contributions and the investment returns on these contributions. If the employee dies before retirement, his or her spouse will be entitled to a survivor’s pension or other death benefit. Part-time workers may also be eligible to join the plan.
A right to a pension that has accrued during a marriage is considered a marital asset according to the Matrimonial Property Act which means that you are obliged to share its value with your legal spouse upon a marriage breakdown. Different considerations apply to common-law spouses. The rules regarding division of pension benefits upon marriage or other relationship breakdown, their methods of valuation and division either from within the pension plan itself, or outside the pension plan by payments of other assets, are very technical and complex and you should consult legal counsel when dealing with these. This is particularly as your pension benefits, along with your home, will often be the most valuable assets you possess.