Canada’s Pension System at a Glance

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Population: 35.5 million

Pension system design

Canada’s pension system is characterized by a mixture of

  • Two public pension schemes (Canada Pension Plan and Old Age Security program)
  • Voluntary occupational employer-sponsored pension plans

Public pension

  • Canada Pension Plan (CPP): forms the basic state pension system

    • Contributory, earnings-related social insurance plan established in 1965
    • Providing basic retirement income
    • Contributory for all employed persons aged 18 or older
    • Contributory social insurance program operating in all parts of Canada, except Quebec
    • Separate Quebec Pension Plan (QPP), almost mirroring the CPP exactly: contributory earnings-related pension plan that pays benefits in the event of disability, retirement, or death; retirement age: 65
    • Receipt of full CPP retirement pension at the age of 65
    • Starting in 2019, CPP will be gradually enhanced (increase of retirement, disability and survivor’s pensions)

    Old Age Security (OAS) program: Government of Canada’s largest pension program

    • Universal basic pension/supplement aimed at poverty reduction
    • Financed from Government tax revenues (no direct payment into it)
    • Employment history is not a factor in determining eligibility: OAS can be received even without having worked or while still working
    • Paid to Canadians aged 65 years and over with legal status and residence
    • Also paid to Canadians with residence in other countries
    • Residents who have lived in Canada for 40 years from age 18 or more receive a full pension; additionally residence for continuously for the 10 years immediately before the approval of OAS pension is necessary

Private occupational pensions (voluntary pension savings)

      • Voluntary private pension plans of employers for their employees
      • Tax-favoured individual savings
      • Voluntary schemes aimed at providing adequate retirement income (fully funded)
      • Investments into these plans are not subjected to taxation until retirement, but are subjected to various regulations among the provinces and territories, and must be registered with the authorities
      • In Canada 97.5% of occupational plans that are managed by pension funds are of DB type (traditional or hybrid-mixed)

Private pension

Private pension investments equivalent to: 156.9% of GDP (2015)

Private pension assets 2015: $ 2,248,544.8 million USD (all forms of private investment with a value associated to a pension plan over which ownership rights are enforced by institutional units, individually or collectively. This indicator is measured in millions of USD; source: OECD)

Pension funds’ assets 2015: $ 1,195,695.8 million USD (assets bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The pension fund is a pool of assets forming an independent legal entity. This indicator is measured in millions of USD; source: OECD)

Net pension replacement rate 2014: 47.9% (individual net pension entitlement divided by net pre-retirement earnings; measures how effectively a pension system provides a retirement income to replace earnings. This indicator is measured in percentage of pre-retirement earnings by gender; source: OECD)

Sources:

Service Canada/Government of Canada – http://www.servicecanada.gc.ca

The Organisation for Economic Co-operation and Development (OECD) – http://www.oecd.org