Retirement planning is essential, and in Canada, retirees can rely on pension programs to provide steady income. Two major programs — the Old Age Security (OAS) and Canada Pension Plan (CPP) — adjust yearly to keep up with the rising cost of living. Starting in 2024, these pensions will see a significant boost, thanks to a 4.8% increase aimed at protecting pensioners from inflation.
Curious about how this affects your pension? Keep reading to learn everything about the 2024 pension boost, how it’s calculated, and what it means for both current retirees and those still in the workforce.
CPP
The CPP is a cornerstone of Canada’s retirement income system, and 2024 brings some positive changes. With a 4.4% increase in benefits, pensioners will receive more than they did in 2023. This adjustment reflects the steep rise in inflation over the past year. As living costs increase, so does the need to protect pensions from losing their purchasing power.
In 2024, the maximum monthly CPP payout will rise from $1,306.57 to $1,364.60. The average monthly payment will be $758.32, helping Canadians stretch their income a bit further. Those still working will also see adjustments, as the income ceiling for CPP contributions moves up from $66,000 to $68,500.
An additional change is the introduction of the “second additional CPP contribution” or CPP2. This new contribution applies to income above the pensionable earnings limit and is meant to enhance future pension benefits. However, for those already retired, the impact will be minimal.
OAS
The Old Age Security (OAS) program helps support older Canadians, and it’s adjusted quarterly for inflation. In 2024, OAS benefits will increase by 0.8%, based on the Consumer Price Index (CPI). This means pensioners will receive higher payments starting in January, reflecting the increase in living costs over the previous six months.
For seniors aged 65 to 74, the maximum monthly OAS payment will be $713.34 in 2024. Those aged 75 and older, who received a 10% boost in July 2022, will see their monthly payment rise to $784.67. This increase continues the government’s focus on providing greater financial support to older seniors.
It’s worth noting that OAS payments are adjusted quarterly in January, April, July, and October. This ensures that benefits remain aligned with inflation throughout the year, helping seniors manage their expenses as costs fluctuate.
Pension Calculation
Wondering how these adjustments are calculated? Each year, the government uses the Consumer Price Index (CPI) to determine the cost of living increase. The CPI measures inflation by tracking changes in the price of goods and services, from groceries to housing.
By tying pension increases to the CPI, the government ensures that the purchasing power of seniors’ income remains stable. This is crucial because inflation can erode the value of fixed incomes, making it harder for retirees to cover their daily needs.
The CPP and OAS programs are designed to shield pensioners from this effect. Each January, Statistics Canada reports on the CPI, and pensions are adjusted accordingly to ensure retirees aren’t left behind by rising prices.
Impact of Pension Boost
The pension boost for 2024 offers significant financial relief to retirees. With higher monthly payments, seniors can manage rising costs without sacrificing their quality of life. For those still working, the increase in the pensionable earnings limit provides room to save more for retirement.
While the boost is welcomed, it’s important to remember that even with increased CPP and OAS benefits, retirees should still plan ahead. Personal savings, such as RRSPs and other retirement accounts, remain crucial for covering gaps between pension income and living expenses. Pensions are protected from inflation, but private savings are not always so secure.
Planning Ahead
As the cost of living rises, it’s more important than ever to plan for retirement. CPP and OAS offer a solid foundation for income, but they may not cover all your financial needs in retirement. Inflation, healthcare costs, and unexpected expenses can add up quickly, so having a robust savings plan is essential.
The 2024 pension boost is a positive step for Canadian retirees, offering increased financial security. However, starting to save early and considering all available income sources will help ensure a comfortable and worry-free retirement.
FAQs
How much will CPP increase in 2024?
CPP benefits will rise by 4.4%, with a maximum monthly payment of $1,364.60.
What is the new OAS payment for 2024?
OAS payments will increase to $713.34 for those aged 65–74 and $784.67 for seniors 75+.
Why are CPP and OAS payments increasing?
CPP and OAS payments are indexed to inflation, rising to match the Consumer Price Index.
How often does OAS adjust for inflation?
OAS is adjusted quarterly — in January, April, July, and October — to reflect inflation.
What is the “second additional CPP contribution”?
The CPP2 is an extra contribution for earnings above the pensionable threshold, aimed at boosting future benefits.
