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Overview of CPP and OAS in 2024

The Canada Pension Plan (CPP) and Old Age Security (OAS) are two of the main pillars of Canada’s retirement income system

The CPP is a contributory pension plan that provides retirement, disability, survivor, and death benefits to eligible Canadians. OAS is a non-contributory pension plan funded by general tax revenues that provides a basic income to seniors aged 65 and older who meet residency requirements.

The CPP was established in 1966 to provide Canadians with a base level of earnings replacement upon retirement. Workers and employers make mandatory contributions to the CPP during a person’s working years. The amount of CPP benefits received in retirement depends on how much and for how long contributions were made. In contrast, OAS payments are not based on employment history or contributions. The maximum OAS pension is available to eligible seniors aged 65 and older who have lived in Canada for at least 40 years after turning 18.

Over the decades, reforms have been made to strengthen and enhance the CPP and OAS. In 2024, Canadians can expect to see changes including an increase to the CPP maximum pensionable earnings, a higher OAS clawback threshold, and routine inflation adjustments to benefits. These measures aim to boost retirement incomes and help seniors keep up with the rising cost of living. For many retirees, CPP and OAS benefits are vital sources of predictable and secure pension income.

Changes in Maximum Pensionable Earnings

The maximum pensionable earnings (MPE) under the CPP will be increasing from $66,600 in 2023 to $68,500 as of January 2024. The MPE is the ceiling up to which CPP contributions are mandatory and benefits accrue. Earnings above the limit are not pensionable under the CPP.

This increase to the MPE will result in higher maximum contribution amounts for CPP and greater pension accrual room for those earning more than the current ceiling. The standard contribution rate will remain unchanged at 5.95% for employees and employers each on pensionable earnings up to the MPE. Self-employed individuals will continue paying 10.9% up to the earnings limit.

The MPE has been rising steadily over the years, from $55,300 in 2019 to $57,400 in 2020. The increase to $68,500 for 2024 reflects growth in average weekly earnings in Canada. Higher MPEs allow the CPP to cover a greater proportion of earnings replacement for middle- and higher-income workers. This strengthens retirement preparedness and reduces the need to rely solely on private savings.

OAS Clawback Limit

Old Age Security benefits are subject to a clawback for high-income seniors. OAS payments start getting clawed back when net income exceeds a certain threshold, and benefits are completely eliminated once income hits a higher ceiling.

For 2024, the OAS clawback threshold will be going up from $86,912 to $90,997. This means seniors can earn up to $90,997 in 2024 before any OAS benefits start getting deducted. The full OAS pension is clawed back at an income level of $136,855 for 2024.

The increase to the OAS clawback threshold provides more tax relief and pension flexibility for seniors with higher incomes. Those who earn between $90,997 and $136,855 will have a smaller portion of their OAS benefits clawed back rather than the full amount. Overall, the higher threshold allows middle- and upper-income seniors to retain more of their OAS pension.

Payment Amounts and Frequency

The maximum monthly OAS pension amount is $672.95 as of fourth quarter 2022 for seniors aged 65 to 74. Those 75 and over receive $850.40 per month. OAS benefits are adjusted quarterly based on the Consumer Price Index to keep pace with inflation.

OAS payments are made on the following schedule:

  • 25th day of the month – If your birthdate falls between the 1st and the 10th of the month
  • 28th day of the month – If your birthdate falls between the 11th and the 20th of the month
  • 1st day of the next month – If your birthdate falls between the 21st and month-end

There are no changes planned to the payment frequency or schedule for OAS in 2024. Pensions will continue being paid on a monthly basis. Most OAS recipients choose direct deposit, but cheques are also an option.

Eligibility and Application Process

To qualify for CPP retirement benefits, applicants generally need to be at least 60 years old and have made minimum contributions over their working career. The amount received depends on lifetime pensionable earnings. Applications for retirement CPP can be submitted 6 months before the intended start date.

The eligibility criteria for the OAS pension are more straightforward. You must be 65 or older, be a Canadian citizen or legal resident, and have resided in Canada for at least 10 years after turning 18. People who have lived here for 40 or more years after age 18 qualify for the full OAS amount.

Applications for OAS can be submitted up to 11 months before the 65th birthday month to avoid any interruption in payments. Required documents include proof of birthdate, Social Insurance Number, and immigration or citizenship status. CPP and OAS applications can be filed online through My Service Canada Account.

CPP Enhancement and Its Impact

Starting in 2019, the CPP is being gradually enhanced to replace more working income upon retirement. This involves slowly increasing the portion of earnings covered by the CPP through higher contribution rates phased in over 7 years.

In 2024, a second higher earnings limit will be introduced at $73,200. CPP contributions on earnings between the new limit and the current MPE will be made at a higher rate of 4% each for employees and employers. This secondary contribution rate will boost future pensions.

When fully phased in by 2025, the CPP enhancement is projected to increase lifetime CPP payments for the average worker by about 50%. Those who consistently earn more than the yearly maximum pensionable earnings will gain the most from the CPP expansion. Early analysis indicates improved retirement incomes and reduced old-age poverty.

Inflation Adjustment and CPI

The CPP provides automatic full inflation protection to retirement, survivor, and disability pensions. Every January, payments are indexed based on changes to the Consumer Price Index (CPI) so that purchasing power does not erode over time.

The CPI measures price movements for a fixed basket of common consumer goods and services, including food, shelter, transportation, and health care. Growth in the CPI reflects increases in the everyday cost of living. CPP benefits are adjusted annually by the change in average monthly CPI over the 12 months to October. This ensures pensions can offset inflation.

OAS benefits received by seniors are likewise adjusted quarterly based on CPI changes. Indexing by inflation protects the real value of CPP and OAS pensions so seniors do not face a financial squeeze. As the cost of living trends higher, so will CPP and OAS payments.

CPP and OAS Calculator

There are several online calculators and tools that allow Canadians to estimate their future CPP and OAS benefits. When using the CPP retirement pension calculator, users enter their age, province of residence, and estimated pensionable earnings each year until age 65. The tool then projects your monthly and annual CPP payments.

The federal government also provides an OAS pension calculator. By entering your date of birth, years of Canadian residence after age 18, and current marital status, you can estimate your OAS pension amount.

These calculators account for early or delayed CPP/OAS take-up, clawbacks, survivor benefits, and other variables. The estimates help with retirement planning, but actual benefits depend on the information in your application. Use the government calculators for the most accurate projections.

Employer and Employee Contribution Rates

As of 2024, required CPP contribution rates will remain 5.95% each for employees and employers on pensionable earnings up to the MPE of $68,500. Above this limit, the new secondary contribution rate will be 4% each for employees and employers. The total combined employer/employee rate on earnings up to the MPE stays unchanged at 11.9%.

Self-employed individuals contribute at double the employee rate, so 10.9% on earnings up to the MPE and 8% between the MPE and new second earnings limit of $73,200 for 2024. These rates are mandated by CPP legislation and help fund disability, retirement, and survivor benefits. Higher CPP contributions within the expanded earnings range will increase future pension amounts.

CPP and OAS Payment Dates

OAS pension payments are issued on the following payment dates each month:

  • 25th of the month – If your birthdate falls between the 1st and 10th
  • 28th of the month – If your birthdate falls between the 11th and 20th
  • 1st of the next month – If your birthdate falls between the 21st and month-end

CPP retirement benefits are paid on the later of these two dates:

  • The day on which you first became eligible for CPP retirement pension
  • The 4th last business day of the month

So CPP payment dates vary by recipient, while OAS dates follow a fixed schedule. Both are reliable sources of monthly income for seniors. Planning retirement spending and bill payments around these deposit schedules is advisable.

CPP and OAS Inflation Adjustments

Inflation protection is central to the design of both CPP and OAS pensions. Without indexing for rising prices, the real value of benefits would erode over the decades spent in retirement.

CPP pensions are adjusted annually based on the 12-month increase in the CPI up to October. For example, the 4.7% inflation rate from October 2021 to October 2022 triggered a 4.7% increase in CPP retirement, disability, and survivor benefits starting January 2024. This indexing ensured CPP incomes kept up with the highest inflation in decades.

OAS benefits receive inflation protection through quarterly adjustments tied to 3-month averages in the CPI reading. Starting in July 2022, OAS rose by 8.7% — the largest quarterly increase ever — to offset skyrocketing inflation. Routine CPI indexing allows OAS and CPP to maintain seniors’ purchasing power.

CPP Changes for 2024

The two most significant CPP changes taking effect in 2024 are:

  • Increase to Year’s Maximum Pensionable Earnings (YMPE) from $66,600 to $68,500
  • Introduction of a new second earnings limit of $73,200 subject to 4% extra contributions

These measures are part of the ongoing enhancement to grow CPP coverage, benefits, and sustainability. The higher YMPE will boost future pensions for median and upper-income earners. Extra contributions on earnings up to $73,200 will further enlarge CPP payments upon retirement.

With the upper earnings limit rising faster than general wage growth, more income will fall under the enhanced CPP. This update brings the CPP in line with current earnings levels and improves income replacement for future retirees.

CPP Payment Dates 2023-2024

CPP retirement pension payment dates for most recipients will be:

2023 CPP Payment Dates

  • January 30, 2023
  • February 28, 2023
  • March 30, 2023
  • April 28, 2023
  • May 30, 2023
  • June 29, 2023
  • July 28, 2023
  • August 30, 2023
  • September 28, 2023
  • October 30, 2023
  • November 29, 2023
  • December 28, 2023

2024 CPP Payment Dates

  • January 29, 2024
  • February 28, 2024
  • March 28, 2024
  • April 29, 2024
  • May 29, 2024
  • June 27, 2024
  • July 29, 2024
  • August 28, 2024
  • September 26, 2024
  • October 29, 2024
  • November 27, 2024
  • December 24, 2024

Mark your calendar with these CPP deposit dates. CPP is a vital income source for millions of Canadian seniors. Timely and reliable payments help cover regular living costs in retirement.

CPP Payment Increase

The maximum CPP retirement pension will be increasing based on the latest inflation data. For 2023, the average monthly CPP payment for new recipients aged 65 was $736. CPP benefits are adjusted every January by the change in the CPI reading from October of the previous year over the prior 12 months.

The CPI rose 4.7% year-over-year to October 2022. This will trigger an increase of 4.7% to the maximum CPP retirement pension starting January 2024. The new maximum CPP payment for seniors who begin receiving benefits in 2024 will be around $770 monthly.

In addition, the rising Maximum Pensionable Earnings to $68,500 for 2024 will boost the average new CPP payment. Each year of strong inflation and increased contributions further grows CPP benefit amounts.

OAS Payment Increase 2024

Seniors who receive Old Age Security can expect to see a significant increase to benefits in 2024, similar to 2022 and 2023. With inflation still running hot in Canada, OAS payments will need to rise substantially to preserve purchasing power.

OAS pensions are indexed each quarter based on growth in the average monthly CPI during the latest 3-month span for which data is available. For the July 2022 to September 2022 period, the CPI rose 7.2% year-over-year. As a result, OAS benefits increased 8.7% starting January 2024.

Given high ongoing inflation, OAS recipients can expect similarly large increases in 2024. The exact OAS payment increase will depend on CPI changes. But strong indexing will help offset rising costs for food, gas, housing, and other necessities. Higher OAS benefits prevent inflation from eroding seniors’ living standards.

In summary, 2024 will bring expanded CPP coverage and stability along with continued inflation protection for OAS and CPP. These changes will improve retirement security and incomes for Canada’s seniors.