CPP and OAS

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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kcowan
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Re: CPP and OAS

Post by kcowan »

I can understand why you guys did not answer my question. I think I will leave it until I die...but I will leave instructions for DW to contact Doug Runchey! In the comments: "Thank you so much for this. I have asked both financial adviser and tax accountant for this information. Both did not have an answer."
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Re: CPP and OAS

Post by Raul »

Tax on CPP Death Benefit

Have to file a T3 Estate Tax Return. Since death was in early 2016, the only income to declare is one OAS payment and CPP death benefit of $2500.

Question: At what rate is Death Benefit taxed?
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Re: CPP and OAS

Post by izzy »

Raul wrote:Tax on CPP Death Benefit

Have to file a T3 Estate Tax Return. Since death was in early 2016, the only income to declare is one OAS payment and CPP death benefit of $2500.

Question: At what rate is Death Benefit taxed?
Maybe you can file a rights and things return ? If that is literally all the income to declare it would probably be non taxable anyway!
http://www.taxtips.ca/willsandestates/minimizetax.htm
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Re: CPP and OAS

Post by freedom_2008 »

izzy wrote:
Raul wrote:Tax on CPP Death Benefit

Have to file a T3 Estate Tax Return. Since death was in early 2016, the only income to declare is one OAS payment and CPP death benefit of $2500.

Question: At what rate is Death Benefit taxed?
Maybe you can file a rights and things return ? If that is literally all the income to declare it would probably be non taxable anyway!
The OAS payment can go to a rights and things return for the deceased, but the CPP death benefits was earned after death which probably should be reported in only either of: 1. the personal return of the beneficiary who received it, or 2. the T3 estate return of the deceased. For T3, with $2500 income, the rate should in the first tax bracket of both federal (15%) and the provincial.

http://business.financialpost.com/perso ... ax-returns
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AltaRed
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Re: CPP and OAS

Post by AltaRed »

I agree with Freedom_2008 that the CPP death benefit was not earned before death, and it should be on the T3 or the beneficiary's return that received it rather than the Final T1 return (the choice being dependent on how the executor handles* the T3 Trust return (taxed in the trust or pass through to the beneficiaries on their tax returns).

As an aside, a regular CPP payment paid after death can go on the Rights and Things return just like the OAS payment. Rights and Things returns are great since the Personal Deduction often wipes out any tax payable. Been there and done that. Just got the NOA on this last week for my mother's R&T return.

* Be careful of tax rates starting 1/1/2016 in Trust returns. They have changed to highest MTR tax rates albeit I believe one can elect to take a 3 year phase-in period where rates are graduated during that period. The Trust Guide provides info on this process. When new Trust tax rates are in full force, it will almost always be better for the Trust to flow through the income and issue T3 tax slips to the beneficiaries than to tax the income in the Trust.
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Re: CPP and OAS

Post by jaguar »

One feature of CPP and OAS is that they don’t account for expected longevity. Women live longer than men, and the wealthy live longer than the poor. Of course, dead people don’t vote.
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Re: CPP and OAS

Post by SQRT »

jaguar wrote:One feature of CPP and OAS is that they don’t account for expected longevity. Women live longer than men, and the wealthy live longer than the poor. Of course, dead people don’t vote.
So poor guys should take CPP ASAP?
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Re: CPP and OAS

Post by izzy »

SQRT wrote:
jaguar wrote:One feature of CPP and OAS is that they don’t account for expected longevity. Women live longer than men, and the wealthy live longer than the poor. Of course, dead people don’t vote.
So poor guys should take CPP ASAP?
And women benefit most from deferral-IF they can afford to wait since women have historically been more likely to be poor in old age!
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Re: CPP and OAS

Post by ghariton »

If I understand this Wall Street Journal article properly, the pension plans of the states of Hawaii and South Carolina are juicing their short run returns by writing naked puts.

Looks extremely risky to me. Is this really the kind of investment activity appropriate for a pension fund, which after all is supposed to be focussed on the long run? What am I missing?

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Re: CPP and OAS

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ghariton wrote:If I understand this Wall Street Journal article properly, the pension plans of the states of Hawaii and South Carolina are juicing their short run returns by writing naked puts.

Looks extremely risky to me. Is this really the kind of investment activity appropriate for a pension fund, which after all is supposed to be focussed on the long run? What am I missing?
The article is behind a paywall, but from what I can read it's not a naked put, but a cash covered put. The latter is exactly equivalent with covered call position (buy the stock, write a call on it), which is about the most conservative strategy possible.
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Re: CPP and OAS

Post by Insomniac »

adrian2 wrote:
ghariton wrote:If I understand this Wall Street Journal article properly, the pension plans of the states of Hawaii and South Carolina are juicing their short run returns by writing naked puts.

Looks extremely risky to me. Is this really the kind of investment activity appropriate for a pension fund, which after all is supposed to be focussed on the long run? What am I missing?
The article is behind a paywall, but from what I can read it's not a naked put, but a cash covered put. The latter is exactly equivalent with covered call position (buy the stock, write a call on it), which is about the most conservative strategy possible.
Try this link: http://investingsignal.com/pensions-pla ... t-journal/
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Re: CPP and OAS

Post by adrian2 »

Thanks!

My point stays the same, it's a relative conservative strategy (less risk than a straight equity position), not a risky one.
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Re: CPP and OAS

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Securing a Sustainable Future for the World’s Pension Systems
Slower economic growth, increasing longevity and declining birth rates in many geographies, from Asia to North America, are among the factors that challenge the world’s pension systems, though some progress has been made to address these challenges, according to the 2016 Melbourne Mercer Global Pension Index.

It is imperative, the Index tells us, for all governments to change the retirement age and the eligibility age for social security and private pensions to mitigate the significant challenges posed by aging populations. Failure to do so will only put more pressure on retirement systems, adversely impacting the financial security of our older citizens.
...
The Index acknowledges that there are areas for improvement in all countries’ retirement income systems. Depending on a country’s system and regulatory scheme, possible measures include:
• Raising the minimum pension for low-income pensioners.
• Adjusting the level of mandatory contributions to increase the net replacement for median-income earners.
• Improving the vesting of benefits for all plan members and maintaining the real value of retained benefits through to retirement.
• Reducing pre-retirement leakage by further limiting the access to funds before retirement.
• Introducing a requirement that part of the retirement benefit must be taken as an income stream.
• Increasing the funding level of the social security program.
• Raising the state pension age and the minimum access age to receive benefits from private pension plans.
• Providing incentives to delay retirement and increase labor-force participation at older ages.
• Providing access to retirement plans on an institutional group basis for workers who don’t have access to an employer-sponsored plan.
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Re: CPP and OAS

Post by Peculiar_Investor »

The Globe and Mail has a lengthy "explainer" article today on the subject.

CPP and OAS: How the financial supports affect your retirement plans - The Globe and Mail
Globe and Mail wrote:Whether retirement is decades away or just around the corner, like most Canadians you’re thinking ahead, and well prepared with all the funds you’ll ever need. Just kidding! Most of us have far less tucked away than we should, something the government knows and plans for accordingly. But what kind of government help can you expect when you turn 65? And will it be enough to live long and prosper? Here, we break down the main financial supports from government.
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Re: CPP and OAS

Post by scomac »

Timely explainer of the OAS and CPP. I have been engaged in a bit of debunking on FB as there is quite a bit of miss-information out there being spread by gullible individuals. The latest bits engage in fanciful predictions about what one should be receiving in benefits and claiming that the supposed shortfall is due to the federal gov't pilfering our savings for infrastructure schemes and general expenditures. :evil:
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Re: CPP and OAS

Post by Koogie »

Timely indeed. I'm in an age bracket where a few of my older peers are now eligible. They've done a bit of googling around ( :roll: ... the same sort that self diagnose via WedMD) and tend to assume that they can apply early and get nearly full CPP, OAS and of course GIS too.

I feel like asking if they got that pony they asked for at their 10th birthday as well....

It falls to me to explain how the world government really works...
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Re: CPP and OAS

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Opinion: France is having a pension crisis. Why isn’t Canada? - The Globe and Mail
According to the Office of the Superintendent of Financial Institutions’ chief actuary, expected pension payouts from the CPP are sustainable as far as the eye can see.

And a couple of decades after the Martin reforms, another federal finance minister – Bill Morneau – pushed through a modest increase in pension benefits, paid for by a modest rise in premiums. Canada has one of the least generous public pension systems; it was only designed to deliver a pension worth one-quarter of the average salary. The Morneau reforms will gradually raise that to one-third of the average salary, while also slightly increasing the maximum income – it’s $66,600 this year – subject to CPP premiums....

But some of the rising spending has to do with an inequitable vote-buying move from the Trudeau government. That’s layered on top of the long-standing inequity of giving OAS to wealthy retirees....

A lower OAS clawback threshold plus an end to bonus payments for older seniors would save Ottawa a lot of money. Depending on where the line is drawn, we’re talking anywhere from billions of dollars a year to tens of billions of dollars. That would free up resources for higher priority areas: health care, child care, and higher GIS payments for the poorest seniors.
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Re: CPP and OAS

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Shakespeare wrote: 14 Apr 2023 09:09 Opinion: France is having a pension crisis. Why isn’t Canada? - The Globe and Mail
But some of the rising spending has to do with an inequitable vote-buying move from the Trudeau government. That’s layered on top of the long-standing inequity of giving OAS to wealthy retirees....

A lower OAS clawback threshold plus an end to bonus payments for older seniors would save Ottawa a lot of money. Depending on where the line is drawn, we’re talking anywhere from billions of dollars a year to tens of billions of dollars. That would free up resources for higher priority areas: health care, child care, and higher GIS payments for the poorest seniors.
Previous governments of both stripes had ample opportunity to lower the OAS clawback threshold and/or increase the rate of clawback but none had the balls to do so. I'm surprised the current government didn't do it when they recently enacted AMT reforms. The linked article suggests that tightening the OAS clawback criteria would generate far more revenue than the AMT changes. And they'd be far more difficult to avoid with loopholes.
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Re: CPP and OAS

Post by Marcus Aurelius »

Thanks for the link. Excellent article and well worth sending to people who don't understand how the Canadian system works.
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Re: CPP and OAS

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Bylo Selhi wrote: 14 Apr 2023 13:32
Shakespeare wrote: 14 Apr 2023 09:09 Opinion: France is having a pension crisis. Why isn’t Canada? - The Globe and Mail
But some of the rising spending has to do with an inequitable vote-buying move from the Trudeau government. That’s layered on top of the long-standing inequity of giving OAS to wealthy retirees....

A lower OAS clawback threshold plus an end to bonus payments for older seniors would save Ottawa a lot of money. Depending on where the line is drawn, we’re talking anywhere from billions of dollars a year to tens of billions of dollars. That would free up resources for higher priority areas: health care, child care, and higher GIS payments for the poorest seniors.
Previous governments of both stripes had ample opportunity to lower the OAS clawback threshold and/or increase the rate of clawback but none had the balls to do so. I'm surprised the current government didn't do it when they recently enacted AMT reforms. The linked article suggests that tightening the OAS clawback criteria would generate far more revenue than the AMT changes. And they'd be far more difficult to avoid with loopholes.
You and I (and others) have argued before that OAS needs to be less generous. Unfortunately, it appears to be politically impossible.
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