When you retire, you will receive income from three primary sources: your work-related public service pension, Canada (or Quebec) Pension Plan (CPP) & Old Age Security (OAS), and any personal retirement savings you have accumulated.
Your defined benefit pension plan
The greatest single financial asset for most public servants is their defined benefit pension plan.
The Pension Plan is a defined benefit that provides you with a predictable retirement income payable for the rest of your life, guaranteed by the government.
● Pension Income is based on retirement age, years of service, and average pensionable salary.
● Selecting a Retirement Date
Depending on when you joined the pension plan the normal retirement age is usually age 60 or 65. You can retire early if you’ve achieved a certain number of years of service and are a certain age. Otherwise, you could take a reduced pension benefit.
● Bridge Benefit: a supplement to your lifetime benefit may be available until you reach 65
● Other benefits
- Annual indexing: Inflation protection
- Survivor Benefit: in the event of your death, your eligible survivor will be entitled to a certain percentage of your benefit
Canada Pension Plan/Old Age Security
CPP/ OAS benefits are federal government-sponsored pension benefits paid to eligible Canadians for life.
The Pension Plan is a defined benefit that provides you with a predictable retirement income payable for the rest of your life, guaranteed by the government.
● CPP Benefits are paid monthly until death and adjusted to reflect inflation. You can start receiving payments as early as age 60 and as late as age 70.
When is the best time for you to receive CPP?
● CPP Benefits are based on number of years contributed and earnings your contributions were based upon.
How are your CPP credits maximized?
● The OAS pension is available to most Canadians as early as age 65 or as late as age 70.
When is the best time for you to apply for OAS?
● The OAS Clawback is a recovery tax on OAS payments if your net income for the year exceeds an annually adjusted threshold.
Will your retirement income push you into the OAS clawback zone?
Your Retirement Savings
Your retirement savings is the amount put aside to reach your personal income goal to supplement your guaranteed pension income and achieve your standard of living and consistent cash flow in retirement. RRSPs and TFSAs are both financial vehicles that help you save for the future by growing your savings tax-efficiently. The choice of one over the other depends on your personal financial situation, your stage of life and your savings goal.
What is the best choice for you?
A Registered Retirement Savings Plan (RRSP) can be used to reduce taxable income and thus reduce the amount of tax owing:
- Contributions are tax-deductible.
- Investments within the plan grow tax-deferred.
Other benefits:
- RRSP Home Buyer’s Plan (HBP)
- RRSP Lifelong Learning Plan (LLP)
- Income Splitting Opportunity
Tax‑Free Savings Account (TFSA) contributions are not tax-deductible, but earnings are tax-sheltered:
- Interest, dividends, and capital gains are tax-free
- TFSA withdrawals are also tax-free
- Amounts withdrawn can be re-contributed the following year.
Other benefits:
- TFSA for first-time home buyers (FHSA)
- Contribution room is cumulative
- Savings and longevity flexibility.