A Reference Guide - Old Age Security and Canada Pension Plan

Canada's Social Security System

Canada's social security system has evolved gradually in response to a variety of social, economic, and political factors. From a modest beginning in 1927, a system has developed that consists of virtually universal benefits, social insurance plans, social assistance programs, and a wide array of health and social services. Canada's retirement income system has three levels.

Under the Canadian constitution, the federal and provincial governments share responsibility for social security. Both play an important role in planning, administering, delivering, and financing income security, health, and social service programs.

In the area of income security, the Department of Human Resources and Social Development administers the following federal programs, which provide financial benefits directly to individuals and make up the first two tiers of Canada's retirement income system:

• the Old Age Security (OAS) program, which includes the Guaranteed Income Supplement (GIS) and the Allowance, and
  
  
• the Canada Pension Plan (CPP), which includes the CPP Disability benefit.

These benefits are delivered to Canadians by Service Canada. Service Canada is also responsible for delivering the Employment Insurance program. Other federal departments and agencies involved in income security include the Canada Revenue Agency (CRA) and the Department of Veterans Affairs (DVA). The CRA collects Canada Pension Plan and employment insurance contributions and delivers the Canada Child Tax Benefit, and the DVA is responsible for pensions and allowances for veterans and their dependants.

Provincial and territorial governments are responsible for other social assistance programs and determine the conditions of eligibility and the benefit amounts for these programs. They also have jurisdiction over Workers' Compensation plans, which provide benefits in cases of injury or death occurring at work. Several provinces also provide income support to seniors by supplementing the benefits paid by the federal Old Age Security program.

The third level of the retirement income system consists of private pensions and savings.

Many employers help build an individual's retirement income by providing pension plans. Some individuals are self-employed or do not have an employer plan or they may wish to supplement their pension income. Canadians can build their own nest egg through Registered Retirement Savings Plans (RRSPs) or other investments such as mutual funds or home equity.

The Government of Canada provides tax assistance on savings in Registered Pension Plans and RRSPs, which encourage and assist in saving for retirement. The savings in these plans are tax-deferred. Contributions are tax deductible and investment income is not taxed as it is earned. The tax is paid when funds are withdrawn from these plans or received as pension income. An individual may also have other personal savings that can be included in his or her retirement plan to supplement future income.

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