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The pensions and retirement savings landscape in Canada

Posted by on Nov 6, 2011 in Retirement | 0 comments

By Anthony Dever

Osler Hoskin & Harcourt LLP

Canada’s pensions and bene!ts regime is varied andcomplex. The federal government and each of the
provinces has its own minimum standards legislationin addition to the federally imposed requirements ofthe Income Tax Act. The lack of uniform legislationacross the country has a signi!cant impact on howpensions are managed in Canada.

The Pensions and Retirement Savings Landscape in Canada

Pensions and retirement savings arrangements in Canada can be divided into three broad categories: state-sponsored social-security bene!t plans; employer-sponsored arrangements; and employees’ own savings.

State-sponsored Social Security Bene!t Plans
The state-sponsored social security bene!t plans consist of the Canada Pension Plan (or, if the employee resides in Québec, the
almost identical Québec Pension Plan) (CPP/QPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). Both employees and employers are required to contribute to either the CPP or QPP (as applicable). Upon retirement, CPP/QPP provides bene!ts based on an employee’s average earnings and years of participation, up
to certain maximums.

As both OAS and GIS are tax-funded, no employee or employer contributions are required for either of these bene!ts. Although OAS is not means-tested up-front, it is subject to a “clawback” based on an income threshold. The GIS bene!t is means-tested.

Employer-sponsored Pensions or Retirement Savings Arrangements

Other than mandatory participation under the CPP/QPP, employers are not required to establish or participate in any type of pension or savings arrangement for the bene!t of their employees. Where employers do establish pensions or savings arrangements for their employees, varying degrees of obligations and liabilities arise, depending on the type of arrangement.


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