Understanding your retirement income

March 15, 2012

Here are three things you need to know about three components of your retirement income.

1. Old Age Security is not integrated with your Teachers' pension

Unlike the Canada Pension Plan (CPP)Old Age Security (OAS) is not integrated with the Teachers' pension plan.

You are currently eligible to begin receiving OAS payments at age 65. Full OAS benefits usually are available to seniors who have lived in Canada for at least 40 years after age 18. Partial pensions may be available if residency requirements are not met.

Most retired teachers qualify for the maximum pension from OAS. The maximum is currently about $540 a month. The federal government begins clawing back OAS when total net income reaches about $69,500.

2. CPP is integrated with your Teachers' pension

Contributions to and benefits from Teachers' take into account your participation in CPP. When you turn age 65, or on the effective date of a CPP disability pension, your Teachers' pension will be reduced. For most pensioners, the reduction is approximately equal to two-thirds of your unreduced CPP retirement pension. This amount is based on a formula, not what you will receive from CPP.

How the CPP reduction formula works

The CPP reduction factor is determined by the Ontario Teachers' Federation and Ontario government, the plan's partners. The most recent change occurred in 2001, when it was reduced to 0.45%.

We determine your CPP reduction at the time of your retirement by using the following formula:

CPP reduction factor x Years of service in Teachers' plan during which you also contributed to CPP x Year's Maximum Pensionable Earnings average or best-five salary (if less) = CPP reduction

3. CPP changes begin in 2012

Changes to CPP are being gradually implemented over the next five years. While these changes won't affect your Teachers' pension, they will have an impact on your overall retirement income. It's important that you understand how they may influence your plans for taking CPP.

Here's a summary of the key changes that became effective Jan. 1, 2012:

  • If you are under age 65, working and receiving a CPP retirement pension, you now have to make mandatory contributions to CPP. If you are over age 65, working and receiving a CPP retirement pension, additional CPP contributions are voluntary.
  • You can collect a CPP retirement pension at any time after age 60, even if you are still employed.
  • If you take CPP early, the amount it is reduced will be increased incrementally (by 2016, reduction will be 0.6% for every month you are under age 65).