How much money will you be entitled to receive upon retirement (CPP, OAS, GIS)?
How Much Money Will You Be Entitled to When You Retire (CPP, OAS, GIS)?
Overview of Canadian Government Pensions and Benefits
There are 4 main types of government pensions or benefits in Canada:
1. CPP – Canada Pension Plan (QPP – Quebec Pension Plan in Quebec)
The Canada Pension Plan is a contributory pension based on your earnings during your working years.
https://www.canada.ca/en/services/benefits/publicpensions/cpp/payment-amounts.html
2. OAS – Old Age Security
A monthly payment available to most Canadians aged 65 or older who meet residence requirements.
https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/payments.html
3. GIS – Guaranteed Income Supplement
A tax-free monthly benefit for people who receive OAS and have low income.
4. Allowance
A tax-free benefit for people aged 60 to 64, provided their spouse receives OAS and is eligible for the Guaranteed Income Supplement.
https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/payments.html
If you have already worked in Canada and contributed to the CPP, you can request a Statement of Contributions to the Canada Pension Plan at www.servicecanada.gc.ca.
The Canada Pension Plan (CPP) usually begins at age 65. You must apply for it; you do not start receiving it automatically. You can start receiving it earlier or later than age 65. Age 65 is considered the standard age for 100% benefits.
Your pension depends on:
• How many years you worked in Canada between the ages of 18 and 65
• How much you earned during those years
• Your contribution history
• In case of divorce, you may be entitled to a portion of your former spouse's pension (pension sharing)
Important Note for Business Owners: If you have your own business and pay yourself dividends rather than a salary, you do not pay CPP contributions, and a pension is not formed for those years (at least for the years you pay yourself only dividends).
CPP Contribution Rates for 2026
If you are an employee, approximately 5.95% (rounded to 6%) of your income is deducted for CPP, and your employer pays roughly the same amount for you. It is important to understand that contributions are not calculated on the first dollar earned, but after a basic exemption of $3,500 per year.
|
Category |
First Ceiling (YMPE) |
Second Ceiling (YAMPE) |
|
Income Threshold |
$74,600 |
$85,000 |
|
Employee Contribution Rate |
5.95% |
4% additional |
|
Employer Contribution Rate |
5.95% |
4% additional |
|
Self-Employed Rate |
11.9% |
8% additional |
Table 1: CPP Contribution Rates for 2026
If your income is up to $74,600 per year (the YMPE for 2026), contributions are calculated on income within this ceiling (minus the $3,500 exemption). If you are self-employed and pay yourself a salary instead of dividends, you are both the employee and the employer, and you must pay both portions of the contributions (i.e., roughly 6% + 6%).
CPP2 - Second Additional CPP Contribution
Recently, the government added a second tier-the so-called second additional CPP contribution (CPP2), introduced as part of the pension plan "enhancement."
For 2026, the first ceiling (YMPE) is $74,600, and the second ceiling (YAMPE) is $85,000. Income between $74,600 and $85,000 falls under CPP2. On this "layer" of $10,400, an additional 4% is taken from the employee, and the employer pays the same amount. If you are self-employed, you pay 8% yourself.
Maximum Annual Contributions for 2026:
• Employee: approximately $4,646 (combined basic and additional)
• Self-employed: approximately $9,293 (combined basic and additional)
• Additional CPP2 contribution for employee: approximately $416 per year
• Additional CPP2 contribution for self-employed: approximately $832 per year
If you did not work for several years between ages 18 and 65, or had a low income relative to the average, up to 8 years of your lowest earnings can be dropped from the calculation for this period.
Additionally, if you stayed home with children and did not work until the child turned 7, the Child-Rearing Provision applies to you. This means that this period of time will be excluded from your pension calculation. You must request the Child-Rearing Provision before or after you start receiving your pension (including CPP Disability Benefit).
If you apply for your pension at age 65, the maximum monthly amount you can receive is $1,507.65 (for 2026). This maximum can be increased if you continue to work and voluntarily (at your discretion) contribute to the CPP (Post-Retirement Benefit).
Most people, even those born in Canada, never receive the maximum; the national average is between $600 and $800 per month. If you worked and contributed to CPP even once, you are entitled to a CPP pension, however small. Some people receive only a few dollars of CPP per month. If you never worked or received dividends all your life, you are not eligible for CPP.
If you decide to retire before or after 65, you will have a reduced or increased pension compared to the amount you would have had at 65 if you stopped working (that amount is considered 100% of your pension).
Adjustment Factors:
• Every month before age 65 reduces your pension by 0.6%
• Every month after age 65 increases it by 0.7%
Examples:
• Retire at age 60: receive 64% of age-65 amount (100% - 0.6% × 60 months)
• Retire at age 65 years and 4 months: receive 102.8% (100% + 0.7% × 4 months)
• Retire at age 70: receive 142% of age-65 amount (100% + 0.7% × 60 months)
Important: If you work until age 65, even if you are already receiving CPP, you must continue to contribute to the CPP fund from your salary. After 65, it is at your discretion.
If you and/or your spouse receive CPP, you can split it between the two of you (Pension Sharing). If you are in different tax brackets, this makes sense and can reduce your combined income tax. To do this, you need to apply for CPP Sharing. Once approved, you can reapply at any time to cancel the sharing if it no longer makes sense.
Paraphrasing Gogol, if the cold evenings on a farm near Canada bore you and you decide to leave, you can receive CPP in another country. Since you will no longer be a tax resident of Canada, a 25% withholding tax will likely be deducted immediately from your pension payments (depending on your new place of residence). Whether you can recover this tax in your new warm, cozy corner of the world, or if you will be charged additional taxes there, is something you need to research for your specific country.
Important: If you work abroad but for a Canadian employer, you must have "proof of employment from the employer." Do not throw away your pay slips and letters confirming who you worked for and during what period.
If your spouse passes away and they were entitled to CPP or were already receiving it, your CPP may be increased up to the maximum that exists in the year of death. For 2026, the maximum is $1,507.65. If you receive $800 CPP and your spouse receives $800, in the event of their death, your maximum will still be capped at $1,507.65, not $1,600. So, take care of your spouse's health, at least for the sake of CPP!
This benefit does not depend on your previous income or contributions. You will receive the maximum if you have lived in Canada for 40 years after turning 18. If you are fortunate enough to have lived in the land of maple syrup for this long, you are entitled to (for 2026) $742.31 per month (ages 65–74).
If you lived here for less time, the calculation is proportional:
The minimum residency period in Canada to receive this benefit is 10 years. It cannot be transferred to a spouse in the event of death, and the initial age of receipt is 65 (there are future plans to increase this to 67). Just like with CPP, you must apply to receive this benefit.
If you decide to receive this benefit later than age 65, every month of deferral (up to age 70) adds 0.6%. That is, at age 70, you would receive 136% of the amount you were entitled to at 65. Waiting to receive OAS can make financial sense depending on your situation.
If your taxable income is too high, your OAS will be reduced. For most immigrants, this won't be a problem, as the reduction starts at a personal annual income of approximately $90,000 (the 2026 threshold is indexed annually). Note: this is your personal, not family, income. The higher your income above this threshold, the more OAS is clawed back until it is completely eliminated at higher income levels.
Just like CPP, you can receive OAS while living abroad, but you must have lived in Canada for 20 years before applying for OAS, AND (very importantly) Canada must have a social security agreement with your country of residence.
You can check the list of countries with social security agreements here: http://www.esdc.gc.ca/en/cpp/international/apply.page
Most post-Soviet republics are not on this list. If there is no such agreement, you will be paid for only 6 months plus the month you left after leaving Canada. Since you do not live in Canada, you will file tax returns and pay taxes in your place of residence.
Guaranteed Income Supplement (GIS)
This benefit can be received from age 65 only if you are receiving or are eligible for OAS. To receive it, you must have a very low income.
|
Status |
Maximum Annual Income (2026) |
Maximum Monthly Benefit |
|
Single |
$22,488 |
$1,108.74 |
|
With spouse (both receive OAS) |
$29,712--$53,904 |
$667 each |
Table 2: GIS Income Thresholds and Maximum Benefits for 2026
Important: These are maximum amounts. It is not guaranteed that you will receive the full amount; your benefit will be reduced proportionally based on your income up to the threshold limits.
To receive GIS, you must live in Canada. This benefit will not be paid to you if you leave the country.
This benefit is also tax-free and is intended for people aged 60 to 64 whose spouse already receives OAS and GIS (or is eligible for them). You can receive this if your family income (for 2026) does not exceed $41,616.
The maximum you can receive is $1,409.72 per month. Again, the higher your combined income (up to the joint maximum of $41,616), the less you will receive. For example, with a total income of $20,000 (including your older spouse's OAS), you will receive approximately a few hundred dollars a month (the exact figure depends on income and changes with benefit indexation).
Like GIS, you must live in Canada to receive the Allowance. It will not be paid if you leave the country.
Conclusion and Financial Planning Recommendations
The Reality of Government Pensions
As you can see, retiring will not make you a millionaire. The problem is also that more and more people are relying on the state in their old age and are not saving anything themselves. Debt has become the new form of savings for many Canadians.
The primary investment for people-exceeding everything else-is buying a home and hoping to sell it to someone upon retirement. When the baby boomer generation retires en masse, there will be intense pressure on the real estate market. The expectation that everyone will mystically make money from real estate is unrealistic, especially considering that a huge number of retirees still have mortgages on this "ideal investment."
The second problem lies in the longevity of pensioners. The very idea of retirement was invented by Otto von Bismarck in the 19th century in Germany, and pensions were paid to those who reached age 70. Few could boast of reaching that age at the time, and the pension fund grew year after year.
In our time, people can live 20-30 years or more in retirement and receive more in total benefits than they contributed during their working years, which creates a fundamental sustainability problem.
If you have mathematical ability, it is not hard to conclude that money will drain from pension funds faster than it can be replenished. This is a problem not only for Canada and state pensions but, to an even greater extent, for private sector pensions. While the government can force people to contribute more to the CPP through legislation, no private organization can force people to pay more or continue working for it.
Save money; you will need it. Government pensions provide a basic foundation, but they are not sufficient for a comfortable retirement. Personal savings through RRSPs, TFSAs, and other investment vehicles are essential components of retirement planning.
I conduct regular seminars in Calgary at my office on topics such as:
• Investments and savings strategies
• Insurance planning
• Tax optimization
• Small business finances
• Estate planning and wills
• And many other financial topics
For more information or to attend a seminar, please visit artemfinancial.ca or contact me directly.
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