Canada's public retirement system has two main pillars: the Canada Pension Plan (CPP) and Old Age Security (OAS). Understanding both — and planning around the OAS clawback — is essential for retirement planning for Canadians of all income levels.
Canada Pension Plan (CPP)
CPP is a contributory plan — you and your employer each contribute based on your earnings. The amount you receive in retirement depends on how much you contributed and at what age you start taking it.
| CPP detail | 2026 figure |
|---|---|
| Employee CPP contribution rate | 5.95% of earnings |
| Maximum annual contribution | ~$3,867 (at YMPE of $68,500) |
| Maximum CPP retirement pension (at 65) | ~$1,375/month |
| Average CPP retirement pension | ~$760/month |
OAS: Old Age Security
OAS is not contributory — it's a universal benefit paid by the government to Canadians 65+ who have lived in Canada for at least 10 years after age 18. The full OAS pension requires 40 years of Canadian residency after 18.
The OAS deferral strategy
You can delay OAS past 65 (up to age 70) for a 0.6% increase per month delayed — 36% more at 70. If you're in good health and can afford not to take it, deferring OAS is often mathematically advantageous. The break-even point is typically around age 83-85.
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