A 4.7% CPP and OAS payment increase implemented 1 January 2024 is expected thanks to inflation indexing and the CPP enhancement.
Will CPP And OAS Increase In 2024?
Key CPP and OAS changes like increased benefits and contribution tiers will be implemented from 1 January 2024, affecting retirement planning.
In 2024, substantial enhancements to retirement benefits are on the horizon for Canadians. The amount will increase to CAD 68500 for the Canada Pension Plan (CPP), marking a significant rise from the previous cap of $66,600. This is part of the CPP and OAS Payment Increase 2024, reflecting the government’s commitment to support the aging population against the backdrop of economic inflation. For Old Age Security (OAS), recipients can anticipate an upsurge as well, with payments ascending by 4.7% as of January 2024. The increase from $86,912 to $90,997 aligns with the need to sustain seniors’ purchasing power. The CPP enhancement will increase the amount working Canadians receive upon retirement, strengthening the financial security of future retirees. This is a direct result of the progressive measures that the Canadian government has been implementing. Additionally, a second, higher earnings limit will be introduced, creating a dual-threshold system that further refines the pension landscape. These forthcoming changes, will be implemented from 1 January 2024, are essential for Canadians to understand, as they may influence retirement planning and savings strategies. It’s crucial to monitor official updates as these projected figures will be confirmed by the relevant authorities.
The Canada Pension Plan (CPP) and Old Age Security (OAS) are two of the main pillars of Canada’s retirement income system. CPP and OAS provide monthly benefits to eligible Canadian seniors to help cover living expenses in retirement. Understanding how these programs work and the changes coming in 2024 is crucial for retirement planning.
The CPP is a contributory pension plan funded equally by employees and employers. All working Canadians over the age of 18 contribute a percentage of their earnings to the CPP. These contributions are invested and grow over time. At retirement, CPP provides a monthly pension based on your contributions and earnings history. The average CPP retirement pension as of 2022 is $814.58 per month.
OAS is not based on contributions but is funded from general tax revenues. Canadian citizens and legal residents who meet the age and residency requirements can qualify for a full OAS pension. As of the fourth quarter of 2022, the maximum OAS pension amount is $697.07 per month for those 65-74 years old.
Both CPP and OAS are indexed each year to keep pace with inflation. This helps protect retirees’ purchasing power. The government adjusts benefits based on changes in the Consumer Price Index (CPI). Indexing ensures CPP and OAS keep up with the rising cost of goods and services.
History and Evolution of CPP and OAS
The CPP was established in 1965 to provide coverage for income in retirement beyond employer pensions or private savings. At its inception, the CPP only covered earnings up to $5,000 annually. The contribution rate was 1.8% for employees and 1.8% for employers.
Over the decades, CPP has been enhanced through increases to the Year’s Maximum Pensionable Earnings (YMPE) and contribution rates:
- YMPE increased from $5,000 in 1966 to $26,500 by 1987
- Contribution rate rose incrementally, reaching 4.95% (employee and employer) by 2003
- Further expansions made in 2019 to enhance CPP benefits over the long term
OAS was also introduced in 1965 as a means-tested pension based on residency, not contributions. Initially the benefits were much lower, with a maximum monthly payment of only $75 for those aged 65-69 in 1966.
Key milestones for OAS:
- Guaranteed Income Supplement added in 1967 to boost pensions for lower-income seniors
- Universal OAS adopted in 1970, eliminating means-testing
- OAS gradually increased from $75 in 1966 to $500 by 1987
- Clawback threshold introduced in 1989 for higher-income pensioners
Today, OAS and CPP work together as the main parts of Canada’s public retirement system. OAS provides a base amount to all and CPP aims to replace 25% of pre-retirement income based on contributions.
Significance and Impact on Retirees
CPP and OAS are vital sources of income for Canadian seniors. Nearly all Canadians over 65 receive OAS benefits. Around 95% of seniors get CPP payments. For a sizable portion of retirees, CPP and OAS represent a significant percentage of their total retirement income.
According to Statistics Canada, the median retirement income for senior families in 2020 was:
- CPP: $8,096 (27% of total)
- OAS: $7,252 (24% of total)
- Workplace pensions: $15,588 (52% of total)
With maximum benefits of over $1,200 monthly from CPP and OAS combined, these programs provide a substantial income foundation in retirement. This is especially important for those without large workplace pensions or private savings.
Understanding upcoming changes to CPP and OAS is essential for today’s workers planning for retirement in 2024 and beyond.
Changes in Maximum Pensionable Earnings
A key parameter for CPP is the Year’s Maximum Pensionable Earnings (YMPE). This sets the maximum amount of income subject to CPP contributions each year. It is also used to calculate maximum CPP retirement benefits. Changes to the YMPE impact how much Canadians contribute into CPP and receive in retirement.
Increase in Maximum Pensionable Earnings for CPP
For 2023, the YMPE is set at $64,900. This will rise to $68,500 in 2024, an increase of 5.6%.
This increase reflects growth in average Canadian wages and is higher than inflation. It means a larger portion of earnings will be covered by the CPP and contributions will rise accordingly.
Workers who consistently have earnings at or above the YMPE will see higher CPP benefits down the road as a result of this change.
Impact of the Increase on Contributions and Benefits
Based on the 2024 YMPE, maximum employee and employer CPP contribution rates will be:
- Employee contribution: 5.95% of pensionable earnings up to $68,500
- Employer contribution: 5.95% of pensionable earnings up to $68,500
For those earning more than $68,500 annually, CPP contributions will max out at:
- $4,077 for employees (5.95% x $68,500)
- $4,077 for employers
Higher YMPE means higher maximum CPP contributions per person. This increase in contributions will lead to higher retirement benefits.
For example, someone who consistently earned the old 2023 YMPE of $64,900 would get a maximum CPP benefit around $1,253 monthly starting at 65.
With the 2024 YMPE rising to $68,500, once fully phased in, the maximum CPP would be approximately $1,320 monthly, an increase of over 5%.
Comparison with Previous Years’ Limits
The 2024 YMPE represents a sizable jump compared to recent increases:
- 2023 YMPE: $64,900
- 2022 YMPE: $64,900
- 2021 YMPE: $61,600
Over the last decade, YMPE has increased at an average of around 3% annually. The boost to $68,500 in 2024 marks one of the largest single-year increases.
This will translate into noticeable jumps in both CPP contributions and retirement benefits moving forward.
OAS Clawback Limit
Higher-income Canadians receiving OAS are subject to a “clawback” on their benefits based on their annual net income. For 2024, the OAS clawback threshold is increasing.
Explanation of OAS Clawback Limit
The OAS clawback means those with high net incomes must repay part or all of their OAS benefits. This functions as a means test on OAS for affluent retirees.
It works on a sliding scale:
- No clawback if net income under $86,912 (2022)
- 15% of OAS clawed back per dollar of income between $86,912-$129,758
- Full OAS clawed back above $129,758
By reducing OAS benefits for higher earners, the clawback reallocates resources to pensioners with lower incomes.
Details of the Increase in the Clawback Limit for 2024
Starting in July 2024, the OAS clawback thresholds will increase to:
- No clawback on incomes below $93,208 (up from $86,912)
- Full clawback above $134,748 (up from $129,758)
This represents over a 7% boost to the clawback limits. The thresholds are indexed each year based on CPI increases.
Implications for OAS Recipients
The higher clawback threshold means more OAS recipients will fall into the no clawback bracket in 2024. Pensioners with net incomes between $86,912 and $93,208 will newly avoid the 15% clawback.
For example, an individual with $90,000 in net annual income would have clawed back $459 in OAS benefits under 2022 rules (15% x $3,088 excess over $86,912). With the new 2024 threshold, they will keep their full OAS pension.
Canadians with net retirement incomes up to around $93,000 will benefit from the adjustment. But those with the very highest retirement incomes will continue to have OAS fully clawed back.
Payment Amounts and Frequency
While OAS clawback limits are increasing, the maximum OAS monthly payment amounts are unchanged for 2024. The payment schedule also remains consistent.
Current Maximum Payment Amounts for OAS
As of late 2022, the maximum OAS paid monthly is:
- Age 65-74: $697.07
- Age 75+: $767.78
These amounts are indexed quarterly based on inflation. The 2024 OAS maximums will likely increase slightly mid-year per the CPI adjustment.
Monthly Payment Details for OAS Recipients
OAS is paid on a monthly basis to eligible seniors. Payments are issued on the following schedule:
- If born between 1st and 10th of month: OAS paid on 2nd last business day of the month
- If born between 11th and 20th of month: OAS paid on 15th of month or previous business day
- If born between 21st and month end: OAS paid on 28th of month or previous business day
Seniors must proactively enroll to begin receiving OAS. Payments commence the month after OAS is approved, with retroactive amounts included.
Changes in Payment Frequency or Structure, if Any
No major changes are slated for 2024 in terms of OAS payment frequency or calculation. OAS will continue to be paid monthly to eligible seniors.
Clawback thresholds increasing and routine inflation indexing will impact 2024 OAS benefits for some. But the payment structure remains unchanged.
Eligibility and Application Process
Canadians looking towards retirement must understand the eligibility criteria for CPP and OAS. They should also plan when to apply to start receiving benefits.
Eligibility Criteria for CPP and OAS
The eligibility criteria for CPP vs. OAS differs significantly:
- Age 60 or older
- Contributed to CPP for at least 1 year
- Currently contributing if under 65
- Age 65 or older
- Canadian citizen or legal resident
- Lived in Canada for at least 10 years after age 18
So CPP requires contributions, while OAS is based on age and residency. It’s possible to get OAS but not CPP if you haven’t worked.
Application Process for CPP and OAS Benefits
Applying for CPP:
- Apply online via My Service Canada Account or mail/fax forms
- Provide personal info, citizenship, Canadian residence, bank details
- Specify your requested start date (age 60-70)
- Provide details of current employment if under 65
Applying for OAS:
- Service Canada usually automatically enrolls you when you file taxes at 65
- Can apply online via My Service Canada if you need to
- Provide citizenship, birthdate, SIN, residence history
- Takes 1-2 months to process after applying
Ideally, you should apply 6-12 months before wanting to start your CPP or OAS pension. This gives time for processing.
Key Requirements and Documentation Needed
When applying, make sure to have:
- Social Insurance Number
- Proof of birthdate (birth certificate, passport, etc.)
- Details of Canadian residence/citizenship status
- Banking info for direct deposit of payments
- Current employer name and address (if under 65)
Providing the proper documentation and personal details ensures your CPP/OAS application is processed smoothly.
CPP Enhancement and Its Impact
A major change to CPP was the enhancement starting in 2019. This will affect those retiring in 2024 and beyond.
Details of the CPP Enhancement Program
The CPP enhancement, phased in from 2019 to 2025, fundamentally changed CPP:
- CPP contribution rate rose gradually from 4.95% to 5.95% for employees/employers
- New additional CPP contributions on earnings above YMPE up to $82,700 (2025)
- Once fully phased in, targeted to increase maximum CPP benefit by about 50%
This multi-year enhancement aims to strengthen CPP and provide higher income replacement in retirement.
How the Enhancement Affects Future Retirees
For employees/employers, the portion of earnings from YMPE up to $82,700 will face:
- 5.95% regular CPP contributions
- 4% additional CPP contributions
So those earning $82,700+ per year will see CPP contributions on around $18,000 more of their income once fully phased in.
This is expected to increase the average CPP retirement benefit by close to 50% for future retirees. Those contributing above the YMPE will see the largest boosts.
Comparison of Benefits Before and After the Enhancement
For example, someone retiring in 2040 with max CPP contributions could see:
- Before enhancement: ~$1,250 monthly CPP
- After enhancement: ~$1,870 monthly CPP
Those consistently earning above YMPE stand to gain over $600 more monthly in CPP through the enhancement. Significant extra retirement income.
Even average-income earners contributing less than the YMPE are projected to receive about $185 more monthly from CPP post-enhancement.
Inflation Adjustment and CPI
A key feature of CPP and OAS is routine inflation protection. Cost-of-living adjustments ensure these benefits hold their real value over time.
Explanation of How CPP and OAS are Adjusted for Inflation
The Consumer Price Index (CPI) measures price changes for a basket of goods and services purchased by Canadians. CPP and OAS inflation indexing is based on the CPI.
Here is how they are adjusted:
- Adjusted annually in January by change in CPI
- Increase calculated using 12-month average CPI data (November to November)
- Applies to both CPP retirement benefits and contribution limits
- Adjusted quarterly based on CPI
- Q1 increase uses CPI change from September to November
- Q2 increase uses December to February CPI change
- And so on for Q3 and Q4
So CPP has a single inflation adjustment each new year, while OAS is adjusted quarterly.
Role of the Consumer Price Index (CPI) in Determining Adjustments
The CPI tracks prices paid for food, housing, transportation, clothing, and other items in the Canadian consumer basket. It provides a broad measure of inflation.
If the CPI rises 3% over a 12-month period, then CPP and OAS benefits will be increased by 3% as well. This links their adjustments directly to real-world inflation.
Statistics Canada calculates and publishes the official Canadian CPI each month. So the CPI provides an independent, Statistics Canada-backed means to index CPP and OAS.
Impact of Inflation on CPP and OAS Payments
Indexing to the CPI ensures CPP and OAS holders do not lose purchasing power when prices rise with inflation. Someone getting $1,000 per month today can expect that same $1,000 to purchase a similar basket of goods and services even if overall prices increase with inflation.
Without indexing, inflation would erode the real value of CPP and OAS pensions over time. Retirees would have to get by on less and less even as living costs climb.
Indexing also means that when inflation is low, CPP and OAS do not decrease. Payments can increase each year but will never go down due to deflation.
So inflation protection provides retirees with income stability and certainty. Seniors can count on CPP and OAS maintaining purchasing power throughout their retirement.
CPP and OAS Calculator
Online calculators allow Canadians to estimate their future CPP and OAS benefits. This can greatly assist retirement planning.
Tools and Resources for Calculating CPP and OAS
The Government of Canada offers free, official online calculators:
- CPP Retirement Pension Calculator – Estimates your CPP based on past earnings, contributions, and projected payments to age 70
- OAS Payment Estimator – Estimates OAS amount based on periods of Canadian residence and projected income
In addition, other resources like the Canadian Retirement Income Calculator from RetirementAdvisor.ca provide combined CPP and OAS estimates.
These tools help identify potential gaps in retirement income from government pensions.
Factors Influencing Benefit Amounts
Key inputs that impact CPP and OAS payment calculations:
- Your current age and desired retirement age
- Lifetime CPP contributions and pensionable earnings
- Periods with zero contributions (taking time off work, out of country, etc.)
- Your current age and income level
- Periods of Canadian residency after age 18
- Spouse/partner’s estimated OAS pension
- Any CPP disability or survivor benefits
Step-by-Step Guide to Using the Calculator
Follow these steps to use the online CPP Retirement Pension Calculator:
- Visit https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html
- Enter your date of birth, current income, and desired age to begin receiving CPP
- For past years, enter your pensionable earnings and periods with zero contributions
- For future years, provide expected pensionable earnings
- Enter current CPP disability or survivor benefits, if applicable
- Click “Calculate” to estimate your monthly CPP benefit
- Adjust inputs and recalculate to see impact of different retirement ages or earnings scenarios
The OAS Payment Estimator follows a similar process adjusted for the specific OAS eligibility and income factors.
These online tools provide an accessible way to estimate your future CPP and OAS.
Employer and Employee Contribution Rates
CPP contribution rates for both employees and employers will be unchanged for 2024. However, the maximum contribution amounts will increase.
Breakdown of Contribution Rates for Employers and Employees
The CPP contribution rates for 2024 are:
- Employee: 5.95% of pensionable earnings
- Employer: 5.95% of employee’s pensionable earnings
These rates are applied to CPP pensionable earnings between $3,500 and the 2024 YMPE maximum of $68,500.
So each contributes 5.95% of an employee’s annual pensionable earnings in this range.
Changes in Contribution Rates for 2024
While the 5.95% contribution rate is fixed for 2024, the maximum contribution amounts will change:
- For 2023, the maximum annual employee or employer contribution is $3,499
- In 2024, the maximum will increase to $4,077
This change simply reflects the new 2024 YMPE of $68,500 rather than an increase in the contribution rate percentage.
Implications for Individuals and Businesses
For employees earning more than $68,500, and their employers, this means slightly higher CPP deductions off each paycheck in 2024. An individual reaching the maximum would contribute about $113 more to CPP over the full year.
Businesses should budget for higher employer CPP contributions in 2024 for employees with pensionable salaries above the YMPE.
However, enhanced CPP will provide greater retirement benefits down the road for these individuals and companies.
CPP and OAS Payment Dates
Retirees rely on CPP and OAS arriving consistently each month. Here are the payment schedules for 2024.
Schedule of Payment Dates for CPP and OAS in 2024
CPP Payment Dates 2024:
- January 29, 2024
- February 28, 2024
- March 28, 2024
- April 26, 2024
- May 30, 2024
- June 28, 2024
- July 29, 2024
- August 29, 2024
- September 27, 2024
- October 29, 2024
- November 28, 2024
- December 19, 2024
OAS Payment Dates 2024:
- OAS paid on 2nd last business day of month for those born between 1st and 10th
- OAS paid on 15th of each month (or previous business day) for those born between 11th and 20th
- OAS paid on 28th of each month (or previous business day) for those born between 21st and month end
Frequency of Payments and Important Deadlines
CPP dates show payment on the set business day each month. OAS varies based on date of birth but follows the same reliable schedule.
There are cut-off deadlines prior to each payment date to get new enrollments and information changes processed in time.
Options for Receiving Payments (e.g., Direct Deposit, Cheque)
CPP and OAS offer payment options:
- Direct deposit – Fast and secure bank transfer on payment date
- Cheques – Mailed to recipient address monthly
- Voluntary tax withholding – Set amount withheld to pay taxes and avoid large bill
Direct deposit is the most popular method. But mail delivery remains available, especially for those uncomfortable with banking online.
Taxes will be owed on CPP and OAS benefits. Withholding avoids lump sum taxes.
CPP and OAS Inflation Adjustments
As the cost of living increases, CPP and OAS benefits are adjusted upward to protect retirees from inflation erosion.
Detailed Explanation of How Inflation Impacts CPP and OAS
Inflation indexing for CPP and OAS works as follows:
- The CPP adjustment effective each January is based on the change in average CPI over 12 months
- If average monthly CPI rises say 2.3% from November 2023 to November 2024, then CPP amounts for 2025 will be increased by 2.3%
- This applies to both the maximum CPP retirement pension and the YMPE ceiling on contributions
- OAS is adjusted quarterly based on the three-month average CPI reading for the previous quarter
- If average monthly CPI rises 1.2% from September to November 2024, then OAS will increase 1.2% for January to March 2025
- OAS is adjusted each of the other quarters using the latest three months of CPI data
So both CPP and OAS stay in sync with inflation via the CPI.
Comparison of Inflation-Adjusted Payments over the Years
Here is how maximum CPP and OAS payments have grown with inflation over time:
- In 1985, maximum monthly CPP was $381.41 vs. $1,290.81 in 2022 – up 238%
- OAS was $332.64 monthly in 1985 vs. $642.25 in 2022 – up 93%
Even adjusted for inflation, CPP and OAS payments have increased significantly over the decades thanks to routine indexing.
Future Outlook for Inflation Adjustments
Economists expect CPI to moderate over the next few years after recent surges. This should result in relatively stable cost-of-living adjustments for CPP and OAS – e.g. likely 1-3% annually.
Larger increases may occur during times of unexpected high inflation like in 2022. But in general, predictable 1-2% annual indexing will continue protecting retirees’ purchasing power.
CPP Changes for 2024
While not as major as the 2019 enhancement, some key CPP changes take effect in 2024.
Overview of Significant Changes to CPP in 2024
The notable CPP changes for 2024 are:
- YMPE increasing by 5.6% from $64,900 to $68,500
- Higher maximum contribution amounts based on the new YMPE
- Introduction of the Second Additional Maximum Pensionable Earnings at $73,200
- Ongoing phased enhancement of CPP benefits continuing
In particular, the introduction of a second earnings ceiling for additional CPP contributions will incrementally strengthen the plan.
Impact of Restructuring with a Secondary Tier for Higher Incomes
Previously, CPP contributions were only required on income up to the YMPE. Starting in 2024:
- Earnings from $68,500 to $73,200 will face a new 4% employee and 4% employer additional contribution
- Resulting in combined CPP contributions on around $5,000 more per individual
- For high earners, providing as much as an extra $200+ annually in CPP retirement benefits
This secondary tier will lead to modestly enhanced CPP for higher-income Canadians.
Implications for Current and Future CPP Recipients
For those earning under $68,500, there is limited impact from the 2024 CPP changes. Those earning $68,500+ will contribute more and receive higher pensions down the road.
By 2030, the CPP enhancement is projected to increase maximum monthly benefits by about $275 compared to 2019 levels. This will significantly boost future retirees’ CPP income.
Even seniors currently receiving CPP will benefit from the routine inflation protection increases year after year.
CPP Payment Dates 2023-2024
Having concrete CPP payment dates for both 2023 and 2024 can help retirees plan finances.
Detailed Schedule of CPP Payment Dates for 2023-2024
CPP Payment Dates 2023:
- January 30, 2023
- March 1, 2023
- March 29, 2023
- April 26, 2023
- May 29, 2023
- June 28, 2023
- July 27, 2023
- August 30, 2023
- September 27, 2023
- October 27, 2023
- November 29, 2023
- December 20, 2023
CPP Payment Dates 2024:
- January 29, 2024
- February 28, 2024
- March 28, 2024
- April 26, 2024
- May 30, 2024
- June 28, 2024
- July 29, 2024August 29, 2024
- September 27, 2024
- October 29, 2024
- November 28, 2024
- December 19, 2024
Importance of Timely Payments for Retirees
Many counting on CPP to cover monthly bills like rent, utilities, and groceries. On fixed incomes, even brief delays could disrupt budgets.
Knowing firm CPP payment dates for the year is crucial for seniors to plan around expenses and avoid late fees.
How Payment Dates are Determined and Communicated
CPP payment dates are set based on the calendar and eligibility requirements:
- Payments on last business day of the month for those born 1st to 10th
- Mid-month payments for those born 11th to 20th
- Payments on 28th for those born 21st to month end
Payment schedules are made public online and mailed to recipients in advance. Any date changes prompt direct notices.
So CPP retirement beneficiaries can rely on and plan around the published payment dates each year.
CPP Payment Increase
After a record inflation adjustment for 2022, CPP payments will likely rise again in 2024 thanks to indexing.
Factors Contributing to the Increase in CPP Payments
The CPP increase each January is driven primarily by the annual inflation rate as measured by CPI changes.
For 2023, the CPP pension increased by 10.2% based on high inflation in late 2021 through 2022. Other factors boosting the 2024 bump will be:
- Ongoing CPP enhancement gradually raising benefits
- Higher YMPE increasing payments for max contributors
- Continued indexing to protect against current inflation
All Canadians who receive CPP retirement benefits will see an upward adjustment in 2024.
Predicted Percentage Increase in CPP Payouts for 2024
While lower than 2022, inflation is expected to remain elevated in 2023. The Bank of Canada forecasts about 3% CPI inflation through mid-2023.
This suggests the CPP increase for 2024 will likely land around 3%, in line with recent inflation.
However, the final percentage depends on inflation figures for late 2023. The increase could be a bit higher or lower once the exact 12-month CPI change is tallied.
Comparison with Previous Years’ Payment Increases
For context, here are CPP payment increases over the last decade:
- 2023: 10.2%
- 2022: 5.9%
- 2021: 4.9%
- 2020: 1.2%
- 2019: 2.3%
- 2018: 1.5%
- 2017: 0.7%
- 2016: 0.8%
- 2015: 1.8%
- 2014: 0.9%
The 2024 raise is unlikely to exceed the unusually high 10.2% for 2023. But with sustained inflation, it should continue outpacing the norm of 1-2% annual indexing.
OAS Payment Increase 2024
Like CPP, OAS benefits will also likely see a substantial cost-of-living increase in 2024 based on inflation.
Detailed Analysis of the OAS Payment Increase for 2024
OAS is adjusted quarterly rather than annually. But the underlying CPI inflation calculation methodology is similar.
The 2024 OAS hike will stem from price growth from around mid-2023 to late 2024. Given ongoing elevated inflation, seniors can expect a significant OAS boost.
For the January 2024 OAS change, inflation figures from October to December 2023 will be used. Current Bank of Canada forecasts point to this lifting OAS payments by 5% or more to start 2024.
Further OAS increases during 2024 will be smaller, assuming inflation stabilizes. But the January 2024 adjustment looks set to be substantial.
Impact on OAS Recipients and their Financial Well-Being
Bigger OAS checks will provide relief to many retirees facing high costs for essentials like food, gas, and utilities. The extra monthly OAS income could cover several weeks of groceries.
Plus, the higher OAS clawback threshold will allow more seniors to keep their full benefits. For lower-income pensioners, these increases may make the difference in making ends meet.
Even those with higher retirement incomes will benefit from inflation protection to preserve purchasing power.
Comparison with Previous OAS Payment Adjustments
The 11.6% total OAS increase over 2022 was the highest in decades due to sky-high inflation. For context, here are the OAS raises over the prior 10 years:
- 2022: 11.6% total over 4 quarterly adjustments
- 2021: 1.3% total over 4 quarterly adjustments
- 2020: 1.7% total over 4 quarterly adjustments
- 2019: 2.6% total over 4 quarterly adjustments
- 2018: 1.9% total over 4 quarterly adjustments
- 2017: 0.6% total over 4 quarterly adjustments
- 2016: 0.8% total over 4 quarterly adjustments
- 2015: 1.8% total over 4 quarterly adjustments
- 2014: 0.9% total over 4 quarterly adjustments
- 2013: 1.2% total over 4 quarterly adjustments
The 2024 OAS increase is unlikely to match 2022’s outsized jump barring an unexpected inflation spike. However, a 5%+ OAS boost in early 2024 seems probable given inflation forecasts.
Ongoing indexing will ensure OAS rises retain pace with climbing living expenses for seniors. Steady, slightly higher increases look set to continue in the near term.
Looking Ahead to CPP and OAS Beyond 2024
While this article has focused on 2024, it’s also helpful to consider how CPP and OAS may evolve over the longer term.
Impact of Canada’s Aging Population
Canada’s population is aging rapidly. By 2030, over 1 in 5 Canadians will be retirement age. This will strain CPP and OAS as the number of beneficiaries balloons.
Costs for CPP and OAS combined are projected to grow from $62 billion in 2020 to $196 billion by 2050 as the population ages. This may necessitate changes to contribution rates or benefits to maintain funding.
Possibility of Further Expansion
To bolster retirement security, there are proposals to further enhance CPP benefits in the future.
One option is raising the target income replacement rate from 25% towards 50%. This could require higher CPP contributions but would provide larger pensions.
There is also discussion of expanding OAS by boosting payments for those over 75. However, costs may dictate restraint on major OAS increases.
Importance of Personal Savings
Despite routine enhancements, CPP and OAS will likely replace a smaller share of pre-retirement income moving forward.
Canadians should maximize RRSPs, TFSAs, and other retirement savings to supplement government benefits. With modest CPP and OAS, private savings will be crucial.
In short, there are important facts to know regarding upcoming changes to CPP and OAS, along with new benefits and a higher limit on earnings, all taking effect on January 1, 2024.
- CPP’s YMPE will rise significantly to $68,500 for 2024 which will increase contributions and future benefits
- OAS clawback threshold is going up over 7% to $93,208 for 2024
- CPP and OAS payments will be adjusted upward in 2024 based on inflation, likely in the 3-5% range
- Introduction of a secondary CPP contribution tier on earnings $68,500-$73,200 will incrementally strengthen CPP
- Knowing the exact payment dates helps retirees budget and plan finances
- Canadians today need to save more privately to supplement future CPP and OAS income
- CPP and OAS will continue to be indexed to inflation each year to protect seniors from rising costs
- The 2024 increase is expected to be around 3-5% for CPP and likely over 5% for OAS based on inflation forecasts
- Higher CPP contributions for incomes $68,500-$73,200 will incrementally strengthen CPP payouts
- Knowing exact CPP and OAS payment dates helps with financial planning
- Canadians need to maximize personal retirement savings to supplement future benefits
- CPP and OAS will face funding pressure from the aging population, but remain solid for now
- Proactively reviewing changes to CPP and OAS will lead to a more secure retirement
By understanding how these programs are evolving, Canadians can effectively plan their retirements and make the most of their CPP and OAS benefits.
The CPP and OAS changes coming down the pipe for 2024, especially higher payments to counter inflation, will directly impact current and future retirees. Staying informed on changes to government retirement benefits will enable Canadians to make the most of CPP and OAS in their financial planning.
Frequently Asked Questions
Many Canadians have outstanding questions about how the upcoming CPP and OAS changes will impact them. Here are answers to some commonly asked questions.
Will CPP and OAS increase each year?
Yes, CPP and OAS benefits are indexed annually to inflation as measured by the Consumer Price Index (CPI). This routine adjustment protects retirees from rising costs. In a typical year, expect a 1-3% increase based on inflation. Larger increases can occur in periods of high inflation.
How much extra will I get from CPP each month in 2024?
For 2024, CPP retirement benefits are projected to increase by approximately 3-5%, depending on inflation. For someone receiving the average CPP amount of $814.58 monthly, a 4% rise would mean about $32 more per month. Those earning maximum CPP would receive around $50 more monthly.
What if I earn more than the new 2024 YMPE of $68,500?
Earnings above the main 2024 YMPE up to $73,200 will be subject to new additional CPP contributions of 4% (employee and employer). This will provide enhanced CPP benefits in retirement for higher earners. For example, someone making $80,000 in 2024 would contribute about $220 extra annually.
Will OAS clawback affect me in 2024?
If your 2024 individual net income is under $93,208, you won’t be subject to OAS clawback. Those earning $93,208 to $134,748 will have a portion of OAS clawed back. Over $134,748 in net income means your OAS will be fully clawed back.
How much extra OAS will I receive each month?
The OAS increase for 2024 will be based on inflation figures for late 2023. Given inflation forecasts, OAS recipients can expect to see payments rise by 5% or more cumulatively over the year’s quarterly adjustments. For a senior getting the average OAS, this would mean about $35 more monthly.
Do I have to apply for the 2024 CPP and OAS increases?
No, you do not need to apply or take any action to receive the automatic inflation increases to regular OAS and CPP retirement benefits. Higher 2024 payments will be reflected automatically in your monthly payments without any action needed.
Where can I get personalized CPP and OAS estimates?
The Government of Canada website provides free online calculators to estimate your future CPP and OAS payments based on your specific situation, contributions, and other personal details. These tools can help with retirement planning.
Will CPP and OAS run out in the future?
CPP and OAS are designed to be sustainable over the long term. However, an aging population is putting pressure on these programs. The government may need to adjust contributions or benefits or raise the retirement age at some point to ensure funding lasts. But major changes are not imminent.