Pensions Flashcards
What is the pension benefit calculation for defined benefit pension?
Annual pension benefit = Earnings × Benefit Rate × Years of Service
How do you determine how much CPP is splittable between spouses?
number of years together/ number of years contributing to CPP. This ratio is multiplied by CPP benefit $ to see what is sharable (they get half each of that benefit)
Pension adjustment calculation
9X (earnings x pension rate) -600
OR for pension based on avg earnings 9X(avg earnings X pension rate X years of service)-600
How much is CPP reduced by before age 65?
0.6% per month
How much does CPP increase between age 65 and 70?
0.7% per month
How much does OAS increase beyond age 65
0.6% per month
when can you take OAS
earliest at 65
Can you always commute the full value of a pension?
No, CRA allows a max to go to a LIRA/LIF. Anything above that max will be taxable at marginal tax rate
Where does someone find their expected CPP benefit at retirement?
Statement of Contributions
When should you apply for CPP if you want to start taking it?
Guideline is 6 months before you want it
How do you share and cancel CPP sharing
have to fill out a form and send to CRA. If cancelling sharing, must be within 4 years or starting sharing
Can you cancel CPP if already taking it?
Yes if you change your mind WITHIN 6 MONTHS OF STARTING IT
what happens to CPP and OAS received after someone dies
must be repaid
What is the time period of when CPP eligibility is calculated
starts later of either person is either 18 or 1966. Ends when you start receiving CPP, die or turn 70
What is the current Years Basic Exemption (YBE)
3,500. No CPP is payable for people earning up to this amount
What are CPP contribution rates for individuals
5.95% by individual, 5.95% by employer
What are CPP contribution rates for self employed people
11.90%
What income is CPP contributions based on for self employed people
Net business income before taxes. Still subject to YBE and YMPE amounts
What is 2025 YMPE
$71,300
What is the tax impact on individuals for CPP contributions
Get a non-refundable tax credit of 15% of contributions. **not deducted from income, it reduces tax owing
How is the employer portion of CPP contributions treated for the corporations’s taxes?
It is a deductible business expense. NOT a tax credit like it is for the employee portion
What is tax treatment of CPP benefits for self employed person on their individual tax return and business return?
Individual claims the 15% tax credit (same and non-self employed people) and business claims the business expense
What is the CPP general drop-out provision
drops 17% (or 8yrs if retiring at 65) years of low/no income years for calculation of benefit
What is the CPP child rearing provision
CPP benefit calculation drops yrs out of calculation for caring fro a child under 7 if low/no earnings
What happens to CPP credits when breakdown of marriage
Credits earned while together can be equally split
Are CPP benefits indexed to inflation
yes
Max CPP benefit at age 65 (2025)
$1,433
Is CPP considered when qualifying for OAS and GIS
Yes
How does CPP pension splitting work
Both must be receiving CPP.
Common law must live together for 1yr.
Must apply for it
How does CPP Post Retirement Benefit (PRB) work?
If still working AND contributing, AND between 60-70, it adds to their retirement benefit. Credit sharing and pension sharing is not applicable on PRB. It is payable the year after they earned it, automatically paid out to pensioner.
What is the max PRB ?
2.5% (1/40th) of the maximum CPP
retirement pension.
How does OAS work
For people between age 65+
Must apply, not automatic
Can cancel up to 6mth after starting it (same as CPP)
When should you apply for OAS
recommended up to 12 month prior to starting it.
Can be retro-paid up to 11 months
What are residency requirements for applying for and receiving CPP and OAS
No residency requirements for CPP. Must be resident for OAS
What residency considerations are there for OAS benefit calculation?
To receive a full OAS pension, a person must have lived in Canada for at least 40 years after turning 18. Individuals with less than 40 years of residency after age 18 but at least 10 years of residency (or meet specific criteria under a social security
agreement) are eligible for a partial pension.
What happens if you leave Canada when receiving OAS?
If absent for longer than 6 months, no longer eligible to receive
What is the amount someone receives if less than full OAS
1/40th of the full pension amount for each year of Canadian residency after 18y/o
Is OAS adjusted for inflation
Yes, quarterly
What is Max OAS
age 65 to 74 entitled to a maximum OAS pension of $727.67 per month. 75 or older, the amount of OAS pension increases to $800.44 per month
How are CPP and OAS taxed
as income
what income is OAS clawback based on
Net income. employment income, investment income, and retirement
pensions, among others
How much is OAS clawed back for every dollar over the bottom threshold
15% for every dollar earned
What is the 2025 minimum and full OAS clawback threshold
Min: $93,454
Full Clawback: $151,668 for ages 65-74 or $157,490 for ages 75 and over
Is OAS considered when applying for GIS
No
Characteristics of GIS
Not taxable, is indexed to inflation, must be receiving OAS to get it, must be resident of Canada
Max GIS for individuals 2025
$1,086.88 per month. Marriage impacts this as depends if one spouse is receiving OAS etc
