Total Retirement Income
Pension payments, including pensions from CPP and OAS, are taxable income. Each month, income tax will be deducted from your pension payment.
Income tax information
To reduce your tax bill at the end of the year, you may choose to increase the tax deducted from your pension payments, especially if you receive income from other sources, such as investment and post-retirement employment earnings. To make this adjustment, contact us to request Personal Tax Credits Return forms. These forms detail the types of claims and deductions for which you may be eligible. Once you have completed them and sent them back to us, we can adjust the amount of tax withheld from your pension.
During your working career you received a T4 tax slip from your employer each year. Now that you are receiving a pension, you will receive a T4A slip from the CAAT Pension Plan instead.
Your T4A slip will indicate the total pension paid to you during the previous year, and the amount of tax deducted from your payments.
CIBC Mellon, our Pension Payroll Agent, will mail your T4A slip in February, and you will need it to complete your income tax return.
For queries regarding your pension payments and T4A slips
Government sources of retirement income
Your CAAT Plan lifetime pension (and your bridge benefit if you are receiving one), make up only a part of your total retirement income. Most Canadians are eligible to receive retirement income through one or more of the programs administered by the federal government. Other sources of income may also be available to you, including income from post-retirement employment and your personal savings such as Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs).
These sources combined make up a solid foundation on which to build your retirement income.
Canada Pension Plan
During your working career you have been contributing to the Canada Pension Plan (CPP) and your employers have also paid into the CPP on your behalf. Any time after you turn 60, you can begin collecting the CPP benefits you have earned based on your personal history of earnings.
If you have not yet applied for your CPP benefit, you can begin the process by contacting Service Canada. CPP is in the process of implementing a number of changes, which began in 2011 and will be completed in 2016. The changes to CPP have no impact on the benefit you receive from the CAAT Pension Plan.
Starting CPP before age 65
CPP pensions can start as early as age 60, with a reduction. The amount of the reduction is increasing over a five year period, so that early CPP pensions that start in 2016 or later will be reduced by 0.6% per month or 7.2% per year with a maximum possible reduction of 36% for those who start CPP at age 60.
Choosing to collect a CPP pension before reaching age 65 does not affect your CAAT Plan pension, or your entitlement to the bridge benefit you receive if you retired early.
Starting CPP after age 65
CPP pensions that start after age 65 are increased by 0.7% per month or 8.4% per year, for a maximum possible increase of 42% for Canadians who start CPP at age 70.
Working and collecting CPP
Canadians can now continue to work and contribute to CPP at the same time, building what is called a “Post-Retirement Benefit” or PRB. If you are between age 60 and 65 and return to work while collecting CPP, you must make CPP contributions and build the additional Post Retirement Benefit. Between the ages 65 to 70, you have the option to contribute. The PRB payments start the year following the year of contributions and are paid for life.
If you would like to learn more details about CPP, please visit Service Canada’s website.
Old Age Security
The Old Age Security (OAS) benefit is available to you at age 65. This benefit provides monthly retirement income to Canadians who have lived in Canada for a certain period of time, regardless of their employment history.
Individuals with a higher income in retirement may have to repay some or all of their OAS benefit. In 2013, the clawback of OAS benefits starts at individual net income exceeding $70,954. OAS is completely clawed back when individual net income is at or above $114,640.
You may have heard about the changes coming to OAS:
- Starting in 2023, the age at which a person can start collecting OAS will increase to 67.
- Effective July 2013, you can choose to voluntarily defer your OAS pension by up to five years once eligible. If you choose to defer, your OAS pension will be increased by 0.6% for each month you delay receipt to a maximum of 60 months providing a 36% increase at age 70.
- From 2013 to 2016, automatic enrolment for OAS will be phased in, meaning eligible seniors will no longer need to apply for their OAS pension by the end of 2016. Those eligible for proactive enrolment will be notified by mail. Until then, you must contact Service Canada to apply for your OAS benefit.
CAAT Plan pensions are paid at the beginning of each month, while government benefits – CPP and OAS pensions – are paid near the end of the month.
You should apply for OAS six months before you turn 65 until automatic enrolment is fully implemented in 2016. You can begin the process by contacting Service Canada.
You need to apply for your CPP and OAS retirement benefits.
Contact Service Canada to apply:
Working after retirement
If you return to work full-time with a CAAT Pension Plan employer, and you are under age 65, you will stop collecting your pension and resume your Plan membership, earning additional benefits in the Plan. If you work part-time, or if you are over age 65, you have the choice of either stopping your pension and rejoining the Plan or continuing to receive your pension alongside your employment income. By the end of the year you turn 71, your contributions to the CAAT Plan must stop, and you will begin collecting your pension from the Plan, even if you continue your employment.
You or your spouse may be able to reduce your overall income tax by splitting your pension income. The spouse with the higher retirement earnings can allocate up to 50% of those earnings to their lower-earning spouse. Splitting your pension income when you file your taxes may be beneficial to you and your spouse depending on your situation. Certain conditions – such as your ages and the types and amounts of income you are receiving – have to be taken into consideration.
You can split your pension by requesting a T1032 Joint Election to Split Pension Income form from the Canada Revenue Agency (CRA). You and your spouse have to complete separate forms and file them with your income tax each year.
It’s a good idea to contact the CRA or an independent financial advisor to determine if pension income splitting is right for you. Also, most electronic tax preparation products will provide estimates of the optimal amount of income splitting. The CAAT Plan is not involved in the income splitting process. Please direct all questions you may have to the CRA.
Canada Revenue Agency
For queries regarding pension splitting