Changes to 2013 retirement benefits
A number of changes have been made to the Old Age Security program as well as the Québec Pension Plan for 20131. As the changes may affect you, below is a recap.
Changes or Expected Changes to the Old Age Security Program for 20132
• Monthly Old Age Security (OAS) pension amount in the first quarter of 2013: $546.07 (last quarter of 2012: $544.98)
• Annual income cut-off at which the 15% OAS reduction applies: $70,954 (2012: $69,562)
• Income cut-off at which the OAS is fully recovered (lost): $114,640
• Monthly Guaranteed Income Supplement (GIS) amount for a single person in the first quarter of 2013: $740.44 (last quarter of 2012: $738.96)
• Income cut-off at which the GIS is fully recovered (lost): $16,560
• GIS amount that is payable each month to a couple: $490.96 per person
For anyone born on or after February 1, 1962, the eligibility age for the OAS pension will increase from 65 to 67. However, those born before April 1, 1958, will still receive their OAS pension at 65. Between these two dates, the minimum age to draw an OAS pension will gradually increase.
Moreover, starting July 1, 2013, it will be possible to defer the start of OAS payments, up to a maximum of 60 months. The deferred benefit will increase by 0.6% for each month of deferral. A person who is 65 years old and eligible for OAS in September 2013 will therefore be able to ask that the payments begin only in September 2018. At 70, the person will see his or her benefit enhanced by 36%.
Deferring the benefit is particularly advantageous for workers whose employment income at 67 would be too high and cause them to lose their OAS. It would be to their advantage to defer the benefit until they retire, but without deferring it for more than five years.
Changes Made to the Québec Pension Plan (QPP) for 2013
• Indexation rate for QPP benefits as at January 2013: 1.80%
• Maximum pensionable earnings (MPE): $51,100 (2012: $50,100)
• Contribution rate: 5.100% (2012: 5.025%)
• Maximum annual contribution for workers and employers: $2,427.60 (2012: $2,341.65) – double this amount for self-employed workers
• Maximum monthly QPP benefit for a new beneficiary at age 65: $1,012.50 (2012: $986.67)
• Increase in the QPP benefit for those who defer until after 65: 0.7% for every month the benefit is deferred (2012: 0.5%) – this way, by applying for your retirement benefit at 70, the benefit amount will increase by 42% instead of 30%
Beginning 2014, you will no longer be required to have stopped working in order to apply for a retirement pension between 60 and 65. In 2014, the pension reduction for early retirement will also be increased progressively, except in the case of persons born before 1954.
Discuss the Impact of These Changes on Your Retirement Plan
Since the economic context and your financial situation are constantly changing, it is important to meet with your advisor or financial planner from time to time in order to update your plan and strategy. They will be able to ensure that your savings plan will allow you to reach your goals and meet your specific needs. They can also propose any adjustments, if necessary.
To help you plan what you need to do to reach your retirement goals, we have also made educational and planning tools available to you. You will find them at nbc.ca/retirement.
1 For more details on the conditions of the QPP or Canada Pension Plan, please visit the following websites: http://www.rrq.gouv.qc.ca/en or http://www.servicecanada.gc.ca/eng/isp/cpp/cpptoc.shtml.
2 The amounts cited above as part of the Old Age Security program are estimates only. OAS benefit amounts are reviewed in January, April, July and October to reflect increases in the cost of living as measured by the Consumer Price Index (CPI).