Olev Edur answers your questions about your rights, personal finance, and estate planning
I’m 63, and I receive a Canada Pension Plan (CPP) survivor benefit in addition to my CPP pension and a widow’s pension from Old Age Security (OAS). I’ve heard that when I turn 65 and start to receive an OAS pension, my CPP benefit will go down. Why? What does my CPP have to do with OAS?
It’s true that your benefit may be reduced at age 65, but this has nothing to do with OAS; it just happens that OAS payments normally begin at the same time that your CPP survivor benefits are recalculated.
Before you reach 65, your CPP survivor benefit consists of a flat base amount plus 37.5 per cent of your late husband’s “calculated” pension entitlement. (A calculated entitlement is the deceased’s actual CPP benefit, or what it would have been if he had been 65 at the time of death.)
After you turn 65, the survivor benefit is changed to a flat 60 per cent of the deceased’s calculated benefit. If that flat figure plus 37.5 per cent of the calculated entitlement is greater than 60 per cent of the calculated entitlement, the benefit will be reduced.
If you already receive a retirement pension, then once you reach 65, the survivor benefit will be rolled into your retirement benefit. However, the combined total can’t exceed the maximum retirement benefit, which is $1,433 per month, or $17,196 per year (indexed annually). If your pension and survivor benefit together exceed that maximum, your total benefit will be reduced accordingly.
So there are two calculations whereby your total CPP benefit may be reduced at 65, and they have nothing to do with OAS—though that benefit will likely change at age 65 as well: rather than receiving a widow’s pension from OAS, you’ll begin to receive the regular OAS pension. Depending on the specifics, you may end up receiving as much as you do now or even more.
You can defer the uptake of OAS as well as your CPP pension until age 70 and receive a larger benefit for each month that you defer benefits. If this might be manageable, I suggest that you call your local Service Canada office to find out what effect it could have on your overall financial prospects from age 65 onward.
