When should you start your public pensions?

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    According to a 2021 report by the National Institute of Aging and the Global Risk Institute, dynamic pension pools are necessary to help make retirement income security viable for many Canadian seniors. That is why it is essential for retiring Canadians to know their options. [1]

    When you reach the age of 60 in British Columbia, you could start receiving 1 of 2 pensions offered to Canadians. At age 65, a second pension option becomes available; but how do you determine when you should start collecting? Do you need to stop working to collect them? How can you ensure you receive them if you are eligible? If you have any of these questions, read on for more information.

    Those who have lived and worked in British Columbia or anywhere else in Canada (excluding Quebec) likely have two public pension options: Canada Pension Plan (CPP) and Old Age Security (OAS). You do not need to retire before collecting either pension but if you are still working, you will still be paying into the CPP program.

    Canada Pension Plan (CPP)

    CPP is a monthly, taxable benefit that helps qualifying Canadians replace a portion of their income when they retire, and is the only pension plan all employed Canadians must contribute to, whether they work on a full-time or part-time basis. The amount of CPP you can receive is dependent on your income before retirement and how much you contributed to the pension plan while you worked.

    The full CPP benefit becomes available at age 65; however, Canadians can choose to start receiving a reduced CPP benefit as early as 60 years of age. The time one chooses to begin collecting CPP will depend on various factors, such as one’s financial situation and preferences. The full CPP benefit is available at age 65, but every additional year you wait to collect can result in higher payments. In many cases, most Canadians could receive up to double the total monthly CPP payments if they postpone collections until 70 years of age.

    When you choose to start collecting CPP, you must apply for the benefit as payments are not automatic. Once collecting CPP, any CPP payments received are also subject to taxation.

    Old Age Security (OAS)

    OAS is like CPP in that you can opt to defer payments for an increased monthly benefit later. OAS cannot be collected until age 65 but will be automatically sent to those eligible starting at that age, generally with no application necessary. OAS is not dependent on your employment status, but rather based on how long you lived in Canada between ages 18 and 65.

    The Government of Canada suggests lower-income retirees eligible for OAS seek more information about the Guaranteed Income Supplement (GIS): Guaranteed Income Supplement – Overview – Canada.ca.

    How Can I Learn More?

    It is important to carefully consider your own retirement goals before making any decisions about pension collections. While you can receive more money per month the longer you postpone pension collection, this option may not align with your current financial requirements. However, it is important to note that both CPP and OAS benefits do not increase further if collected after age 70, so there is no reason to delay payments further beyond this time.

    Disclaimer

    While Route65.ca makes every effort to ensure content accuracy for our readers, this article is intended to be informational only and readers should consult official government sources or a qualified financial advisor for the most up-to-date and personalized advice.

    You can also visit The Government of Canada’s website for further information: Deciding when to start your public pensions – Retirement Hub – Canada.ca.

    References

    1. MacDonald, Bonnie-Jeanne, Barbara Sanders, Laura Strachan, and Mitch Frazer. “Affordable Lifetime Pension Income for a Better Tomorrow: How we can address the $1.5 trillion decumulation disconnect in the Canadian retirement income system with Dynamic Pension Pools.” November 2021. https://static1.squarespace.com/static/5c2fa7b03917eed9b5a436d8/t/627581951d7a224688e671e0/1651868053425/NIA+DP+Report+in+Brief+-+Final+-+May+6%2C+2022.pdf
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